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kotra industries berhad(497632-P)

No. 1, Jalan TTC 12,Cheng Industrial Estate,75250 Melaka.Tel : 606-336 2222Fax : 606-336 6122

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Annual Report 2010

2010

www.kotrapharma.com • www.appeton.com

Annual Report 2010

Momentum in Excellence

1 Corporate Information2 Directors’ Profile6 Chairman’s Statement9 Corporate Governance Statement20 Statement on Internal Control22 Report of the Audit Committee

Financial Statements28 Directors’ Report33 Statement by Directors & Statutory Declaration34 Independent Auditors’ Report36 Income Statements37 Balance Sheets38 Statements of Changes in Equity

39 Cash Flow Statements41 Notes to the Financial Statements75 List of Properties76 eDividend77 Notice of Annual General Meeting

Shareholding Statistics81 Analysis of Shareholdings81 Substantial Shareholders81 Directors’ Shareholdings82 30 Largest Shareholders

Form of Proxy

Contents

VisionHumanising Healthcare – Everyone deserves ahealthier tomorrow

MissionTo be the centre of excellence for pharmaceuticalindustry

Core ValuesWe act with IntegrityWe deliver on CommitmentWe are Customer-OrientedWe work with Passion and Team SpiritWe are a Responsible Corporate CitizenWe believe Everything is Possible

Company Secretaries

Ow Pee Juan (MAICSA 7013304)Mah Li Chen (MAICSA 7022751)

Audit Committee

P’ng Beng Hoe, BKT, PJK, JP (Chairman)Azhar bin HussainPiong Teck Min

Board of Directors

Y. BHG. TAN SRI DATuK DR. OMARBIN ABDuL RAHMANJSM, JMN, DMSM, PSM(Independent Non-Executive Chairman)

PIONG TECK ONN(Managing Director)

PIONG TECK MIN(Non-Independent Non-Executive Director)

Y. BHG. DATuK PIONG TECK YENDMSM, DSM, PJK, JP(Executive Director)

CHIN SWEE CHANG(Executive Director)

OMAR BIN MD. KHIR(Independent Non-Executive Director)

P’NG BENG HOEBKT, PJK, JP(Independent Non-Executive Director)

AzHAR BIN HuSSAIN(Independent Non-Executive Director)

Remuneration Committee

Y. Bhg. Tan Sri Datuk Dr. Omarbin Abdul Rahman, JSM, JMN, DMSM, PSM (Chairman)Omar bin Md. KhirPiong Teck MinPiong Teck Onn

Nomination Committee

Y. Bhg. Tan Sri Datuk Dr. Omarbin Abdul Rahman, JSM, JMN, DMSM, PSM (Chairman)Omar bin Md. KhirPiong Teck Min

ESOS Committee

Azhar bin Hussain (Chairman)P’ng Beng Hoe, BKT, PJK, JPPiong Teck Onn

Registered Office

48 Jalan Kota Laksamana 2/15Taman Kota LaksamanaSeksyen 275200 MelakaTel : 06-2836620Fax : 06-2836449

Business Office

No. 1, Jalan TTC 12Cheng Industrial Estate75250 MelakaTel : 06-3362222Fax : 06-3366122

Registrar

Mega Corporate Services Sdn. Bhd.Level 15-2, Faber Imperial CourtJalan Sultan Ismail50250 Kuala LumpurTel : 03-26924271Fax : 03-27325399/03-27325388

Auditors

Crowe Horwath52 Jalan Kota Laksamana 2/15Taman Kota Laksamana, Seksyen 275200 MelakaTel : 06-2825995Fax : 06-2836449

Legal Advisors

Chee Siah Le Kee & PartnersAdvocates & Solicitors105, Taman Melaka Raya75000 MelakaTel : 06-2833423Fax : 06-2847251

Stock Exchange Listing

Bursa Malaysia Securities BerhadMain Martket

Corporate Information

Kotra Industries Berhad 2010 Annual Report

2

y.Bhg. tAN SRi DAtUK DR. OmAR

BiN ABDUL RAhmAN Independent Non-Executive Director & Chairman

78, MalaysianDate appointed: 5 June 2000

Board Committee memberships:• Chairman, Nomination Committee • Chairman, Remuneration Committee

Academic qualification and honours:• Bachelor of Veterinary Science (Sydney

university)• Certificate of Pathology (university of

Queensland)• Doctor of Philosophy (Cambridge

university)• Honorary Doctorates (universities of

Sterling, Melbourne, Guelph, Bristol and Queensland, universiti Teknologi Malaysia, universiti Kebangsaan Malaysia and universiti Putra Malaysia)

• Professor Emeritus, universiti Putra Malaysia

Experience and career path:• Veterinary Research Officer of Veterinary

Research Institute, Ipoh in 1960• Deputy Director of Veterinary Research

Institute, Ipoh in 1971• Professor of Animal Pathology and

Founding Dean of the Faculty of Veterinary Medicine and Animal Science of universiti Putra Malaysia (uPM), and Deputy Vice-Chancellor of Academic Affairs of uPM from 1972 – 1987

• Science Advisor in the Prime Minister’s Department from 1984 – 2001

• Founding Chairman of Technology Park Malaysia Corporation

• Founding Joint Chairman of the Malaysian Industry-Government Group for High Technology (MIGHT)

• Founding Chairman of Composite Technology (Research) Malaysia Sdn Bhd (CTRM)

• Founding Chairman of the Malaysian Technology Development Corporation (MTDC)

• Founding and Executive Chairman of Kumpulan Modal Perdana Sdn Bhd from 2001 – 2007

• Founding and current Chairman of London-based Commonwealth Partnership for Technology Management Ltd (CPTM)

• President and CEO of Malaysia university of Science and Technology (MuST) from 2007 – 2009

Directorships in other companies:• OSK Ventures International Bhd• Green Packet Bhd• BCT Technology Bhd• GW Plastics Holdings Bhd Group

Awards:• JSM, JMN, DMSM, PSM• Asean Achievement Award (Science),

1993• Fook Ying Tung South-East Asia Prize,

1998• Tun Abdul Razak Award (International

Category), 2000

Committees served:• Ministry of International Trade Industry’s

(MITI) Consultative Panel on Trade and Industry

• National Council for Scientific Research and Development

• National Development Planning Committee

• National Information Technology Council• National Telecommunication Council• Malaysian Veterinary Council• united Nation’s Council for Science and

Technology for Development (uNCSTD)• Organization of the Islamic Conference

(OIC) Ministerial Committee on Science and Technology Cooperation (COMSTECH)

• Joint Convener of the Langkawi International Smart Partnership Dialogues (LID)

• Current Chairman of Joint-Executive Group for the Southern Africa International Dialogues (SAID)

• Current member of uNESCO’s World Commission on Ethics in Scientific Knowledge and Technology (COMEST)

• Current member of the Malaysian Innovation Foundation

• Current member of Malaysian Toray Science Foundation

Associations & affiliations:• Senior Fellow and First President,

Academy of Sciences Malaysia • Board Member, Past President, Fellow and

Advisor, Malaysian Scientific Association• Past President, Association of Veterinary

Surgeons Malaysia• Fellow, Academy of Sciences for the

Developing World (TWAS)• Founding Fellow, Islamic World Academy

of Sciences• Honorary Fellow, National Academy of

Science Republic of Kyrgyzstan• Past President, Science Council of Asia• Past President, Third World Network of

Scientific Organisations, Asia Region• Immediate Past President, Federation

of Asian Scientific Academies and Associations (FASAs)

Directors’ profile Directors’ profile


3

PiONg tECK ONNManaging Director


Board Committee memberships:• Remuneration Committee• Employees’ Share Option Scheme

Committee

Academic qualification:• Bachelor of Science in Pharmacy

(university of Wales, united Kingdom)

Career path:• Began his career in retail and wholesale

pharmaceutical business at City Chemist & Asia Pharmacy

• Instrumental in starting and developing the manufacturing, research and development and marketing departments of Kotra Pharma (M) Sdn Bhd (KPM)

• Responsible for introducing various conventional dosage forms ranging from tablets, capsules, creams and ointments, wet and dry syrups and injectables, both aseptically and terminally filled from 1985 – 1995

• Managing Director responsible for the Group’s overall operations, business strategic directions and driving the Group’s initiatives towards achieving its various set goals

National & international Committees Served:• Chairman of the ASEAN Pharmaceutical

Industry Club (APC) (2008-2009)

Associations & affiliations:• Past President (2008-2009) and Executive

Council Member (1998-2010) of the Malaysian Organisation of Pharmaceutical Industries (MOPI)

Relationships with other Directors/Substantial Shareholders:• Brother to Piong Teck Min and Y.Bhg.

Datuk Piong Teck Yen• Married to Chin Swee Chang

PiONg tECK miNNon-Independent Non-Executive Director


Board Committee memberships:• Audit Committee• Nomination Committee• Remuneration Committee

Academic qualification:• Malaysian Certificate of Education

Experience and career path: • Handled the pharmaceutical wholesale

business of KOT in 1970• Managing Director of Lonnix (M) Sdn Bhd,

specializing in broad range traditional medicine

• Well-versed with the intricacies of the local pharmaceutical trade

• Built a good business network with Malaysian wholesalers in the pharmaceutical trade

Associations & affiliations:• Treasurer, Chinese Medicines

Manufacturers’ Association of Malaysia

Relationships with other Directors/Substantial Shareholders:• Brother of Piong Teck Onn and Y.Bhg.

Datuk Piong Teck Yen• Brother-in-law of Chin Swee Chang

y. Bhg. DAtUK PiONg tECK yENExecutive Director


Academic qualification:• Lewisham College, united Kingdom

Experience and career path:• Responsible for marketing and sales

activities of KOT in 1989• Sales Manager of KPM in 1989 • Marketing Manager of KPM in 1995

and was instrumental in formulating and implementing promotions aimed at creating brand awareness

• Current Business Director responsible for the development of exports and international marketing activities of the Group

Awards:• DMSM, DSM, PJK, JP

Relationships with other Directors/Substantial Shareholders:• Brother of Piong Teck Min and Piong Teck

Onn• Brother-in-law of Chin Swee Chang



4

ChiN SwEE ChANgExecutive Director


Academic qualification:• Bachelor of Science (Hons) in Data

Processing (university of Leeds, united Kingdom)

Experience and career path: • Programmer at Systems Automation Sdn

Bhd in 1982, involved in development, implementation, user-training and maintenance of insurance software sub-systems

• Analyst Programmer at Eastern Systems Design Sdn. Bhd. in 1984, responsible in the development and maintenance for general accounting, insurance broking, hire purchase/leasing software

• Head of the Electronic Data Processing Department at Robert Bosch (South East Asia) Pte Ltd in 1987, responsible for user support system coordination; coordination/liaison of system information with regional office and headquarters in Germany. Helped to coordinate, convert, transfer data and system migration from Nixdorf to IBM AS/400 system in 1991

• IT Manager of KPM in 1993. Transformed the computerization of the entire business from a stand-alone personal computer (PC) environment to a local area network PC multi-user system, with fully integrated material requirements planning, financial and distribution software. Coordinated and implemented a new, fully integrated Symix MRP (uS) package on PROGRESS database platform in 1997. Set-up an in-house IT team to support the growing number of users and computer systems in 2001. Since then, Symix system has gone through two rounds of upgrades. Symix was renamed as Syteline where the database was converted to MS SQL. Was also responsible for setting up and ensuring the smooth running of order processing, administration and human resources. Was instrumental its setting up as the demand for exports increased in the Shipping Department

• Waspromotedtothecurrentposition,ChiefInformation Officer responsible

for overseeing the operations and development of Management Information Systems, Order Processing and Administration departments

• Was the Project Manager for the SAPProject implementation which started in November 2008 and went live as scheduled in July 2009. Modules of SD, MM, FICO, and partial PP were implemented together to replace the legacy Infor ERP Syteline system

Relationships with other Directors/Substantial Shareholders:• Sister-in-law of Piong Teck Min and Y.Bhg.

Datuk Piong Teck Yen• Married to Piong Teck Onn

OmAR BiN mD. KhiRIndependent Non-Executive Director


Board Committee memberships:• Nomination Committee• Remuneration Committee

Academic qualification:• Cambridge School Certificate• Completed an Estate Management

Course

Experience and career path:• Assistant Estate Manager in Socfin

Plantations in 1958, devoted attention on various rubber and palm oil estates

• Acting Manager of Socfin Plantations in 1973

• Experience in Human Resources Management & Public Relations from 1977 – 1981

• upon retirement as Manager 1 (Senior Group Manager) in 1992, was in charged of approximately 10,000 acres of rubber and palm oil estates in Batang Berjuntai, Selangor

Associations & affiliations:• Former Committee Member, Malaysian

Employers Federation• Former Member, of Employers Panel

(Industrial Court)• Former Chairman, Selangor State

Malaysian Agriculture Producers Association Advisory Panel

• Former Chairman, Selangor Planters Association

• Former Council Member, zoo Negara• Former Committee Member, united

Planting Association of Malaysia



5

P’Ng BENg hOEIndependent Non-Executive Director

65, MalaysianDate appointed: 22 August 2007

Board Committee memberships:• Chairman, Audit Committee• Employees’ Share Opt ion Scheme

Committee

Professional qualification:• Chartered Accountant

Experience and career path:• Former Partner of Pricewaterhouse

Coopers• Chartered Accountant with accumulated

and extensive experience in audit, taxation, public listing of companies,

management consultancy, corporate restructuring for a wide range of industrial and commercial companies in the public and private sectors including multinational corporations and government corporate bodies

Awards:• BKT, PJK, JP

Associations & affiliations:• Member of the Institute of Chartered

Accountants in Australia• Member of CPA Australia• Member of the Malaysian Institute of

Accountants (MIA)• Member of the Malaysian Institute of

Certified Public Accountants (MICPA)

AzhAR BiN hUSSAiNIndependent Non-Executive Director

57, MalaysianDate appointed: 12 November 2007

Academic qualification:• Bachelor of Pharmacy (Hons) (university

of Wales, united Kingdom)

Experience and career path:• House Pharmacist, Glaxo Malaysia in

1976• Production Executive, Glaxo Malaysia in

1977 • Assistant Manager, Glaxo Malaysia in

1981 • Production Manager, Glaxo Malaysia in

1983• Technical Manager, Glaxo Malaysia, Glaxo

Pakistan in 1989• Technical Director, Glaxo Malaysia in

1993• Board of Director, Glaxo Malaysia in 1993• Executive Director, Intercircle Holdings

Sdn Bhd in 1994• Managing Director, Pharmaniaga

Manufacturing Bhd and later Executive Director, Pharmaniaga Bhd from

1994 – 2003• Managing Director, Pharmaniaga Bhd from

2003 – 2006• Senior Director, uEM Group in 2007• Business Development Consultant,

Technology Park Malaysia in 2008• Head, TPM Biotech Sdn Bhd from 2008 – 2010• Director and Senior Principal Consultant,

Neoconsult Sdn Bhd from 2010 - present

Associations & affiliations:• Past President of the Malaysian

Organisation of Pharmaceutical Industries (MOPI)

• Associate Member of the Harvard Business School Alumni Club of Malaysia• Member of the Malaysian Pharmaceutical

Society (MPS)

Notes:

1. Relationship The Directors do not have any family

relationship with any Director and/or major shareholders of the Company except otherwise stated in individual profiles

2. Conflict of interest None of the Directors have any conflict

of interest with the Company

3. Conviction for Offences None of the Directors have any con-

viction for offences (other than traffic offences) within the past 10 years

4. Other Directorship The Directors do not hold any other di-

rectorship of public companies except otherwise stated in individual profiles



6

FiNANCiAL UPDAtES

Kotra registered revenue of RM102.4 million for the financial year ended June 2010, an increase of 13.7% from the RM90.0 million recorded the year before. Profit before tax stood at RM12.5 million compared to RM9.0 million in the previous year, an increase of 38.7%.

The 38.7% jump in profit before tax was mainly due to higher sales revenue, a more profitable product range, effective advertising and promotional activities executed at a lower cost. In addition, the previous investment efforts made by the Group to build its brands globally are beginning to generate results.

OPERAtiONAL UPDAtES

Domestic Operations The Group’s domestic operations continued its positive growth trend as the spending power of local consumers returned. Domestic sales of the Group has grown by 6.2%, contributing to 61% or RM62.5 million of the Group’s revenue as the result of a more focused marketing strategy which have better impact on consumers.

The new products launched by the Group during the financial year were Axcel Iridin Linctus (for dry cough), Axcel Flemin Expectorant (for productive cough), Axcel Erythromycin ES-400 Suspension and Appeton Essentials Activ-C (new pack) -250mg (orange flavour), has also contributed to the increase of the Group’s revenue.

Kotra’s products received the Halal Certification from JAKIM (Jabatan Kemajuan Islam Malaysia) in December 2009. The certification, which is recognized in many Muslim countries worldwide, bodes well for the Group’s export strategy especially in the Middle East countries.

The construction of the new manufacturing plant adjacent to our current manufacturing facility and headquarters was completed with its production scheduled to start in the next financial year. The building received its Certificate of Fitness in September and is now occupied by the Engineering Department and Quality Assurance Department. The Group is currently in the process of getting the cGMP (current Good Manufacturing Practice) certification.

The Group also focused on strengthening its manpower during this financial year. Staff numbers increased from 530 in June 2009 to 603 in June 2010. However, due to the small talent pool of trained and experienced personnel available in the country, the Group continued to face difficulty in recruiting local experts whilst the practice of pinching staff among the pharmaceutical companies continued to hamper the growth of the industry. As a counter measure, Kotra recruited personnel from overseas and enhanced its internal training programmes for its employees.

Dear Shareholders,

The world’s recovering economy has had a minor impact on our Group’s business activities in the last financial year. During the challenging period, the Group continued to chart steady growth in revenue and profit; a record that has never been tarnished since it was listed in the Bursa Malaysia.

As Chairman of the Board of Kotra Industries Berhad (Kotra), I am proud to announce that our Group’s revenue for the financial year under review has crossed the RM100 million-mark, which could have been achieved only with detailed planning, strong teamwork, focused efforts by the Board members, management team and individual employees. In this regard, the achievement has an immense positive psychological impact for the Group.

The following report will provide an overview of the Group’s performance for the year ended 30 June 2010.

Chairman’s Statement


7y.Bhg. tAN SRi DAtUK DR. OmAR BiN ABDUL RAhmAN

Independent Non-Executive Director & Chairman

Export OperationsThe Group’s export operations continued to expand during the year under review. The contribution of exports to the Group’s revenue increased from 35% to 39% with a growth of 27.9% as we penetrated into new markets. These were: Tanzania, Kenya, Ethiopia, Sudan, Mongolia, Bangladesh, China, Laos and Yemen. These markets welcomed our Appeton products namely Appeton Weight Gain, Appeton Wellness 60+, Appeton Infant Drops and Appeton Multivitamin with Lysine.

The Group will continue to further develop and improve its export strategy and is constantly looking for opportunities to penetrate the international market by leveraging on Malaysia’s Pharmaceutical Inspection Cooperation/Scheme (PIC/s) status. Efforts include ensuring that the Group’s new manufacturing plant is accredited with the necessary certification which complies with the international standard for pharmaceutical manufacturing.

iNDUStRy OVERViEw

Local The local pharmaceutical industry remained positive during the year under review despite the slow global economy. The higher demand from the Government sector, which emphasized efforts on reducing cost, and the influenza A (H1N1) virus outbreak were the main drivers of the pharmaceutical industry’s performance last financial year. The change in consumer spending, where more affordable medicines are preferred, also had an impact in the overall performance of the local pharmaceutical industry.

The Malaysian Organisation of Pharmaceutical Industries (MOPI) reported that the positive growth was due to the changing demographics, expectations for better healthcare and therise in disposable income.

Although the pharmaceutical industry remained strong, the industry players had to face intense competition and higher cost of imported raw materials. This had resulted in lower profit margins for the industry players.

Recently, the Government started the drive to transform the nation into a high-income economy. The initiative which is headed by PEMANDu (Performance Management and Delivery unit) includes the pharmaceutical industry as acrucial sector to achieve the goal. The Government plans to revitalize the industry by encouraging more private players and the existing players to upgrade their capability and technology. Kotra supports this initiative and is presently at the forefront with its newlycompleted state-of-the-art manufacturing facility.

Current ly, the s ize of the Malays ian pharmaceutical industry is relatively small with approximately 36 players in active business. Most of them continue to focus on satisfying domestic consumption with only a few which have interest for exports.

The Government is hoping to change this and is planning to transform the local pharmaceutical industry. One of the New Key Economic Areas (NKEA) aims is to turn the pharmaceutical industry into a strategic industry for the nation. In this initiative, the Government and the private sectors from the pharmaceutical industry will work together to generate an estimated uSD4 billion in revenue and create 10,000 jobs by year 2020.

Chairman’s Statement


10

Corporate Governance Statement

meetingThe Board meets at least once in every quarter. During the year under review, five (5) Board meetings were held to discuss and decide on a variety of issues pertaining to the Group’s financial results, key risk areas, business plans, proposals and announcements of financial results prior to public release.

Below is the attendance list of individual directors during the financial year under review:

Kotra Industries Berhad 2010 A

11

During the previous financial year, no new member was appointed to the Board.

Re-electionAll Directors are required to go forward for re-election by shareholders at the Annual General Meeting (AGM) at intervals of no more than three years, together with all new Directors appointed since the previous AGM, under the Company’s Articles of Association. Section 129 (6) of the Companies Act 1965 requires that all Directors over seventy (70) years of age go forward for reappointment each year. Retiring Directors may offer themselves for re-election or reappointment.

The Directors listed below are due to go forward for re-election or reappointment at this year’s AGM:

• Y. Bhg. Tan Sri Datuk Dr. Omar bin Abdul Rahman (Chairman)• Piong Teck Onn• P’ng Beng Hoe• Azhar bin Hussain • Omar bin Md. Khir

trainingThe Board acknowledges the importance of continuous learning and training for its members. Directors are encouraged to review their own training needs on a regular basis and participate in conferences, seminars, workshops or dialogues that can enrich and amplify their contribution and role as a Board member.

The following are the list of trainings, conferences, workshops and seminars where the Directors have participated in:

Director training / Seminar / workshop Dates Attended

Y. Bhg. Tan Sri Datuk Dr. Omar bin Abdul Rahman

From the Trenches – Insights and Perspectives of Malaysian Industry Leaders. Perdana Leader-ship Foundation.

20 August 2009

Seminar on “Capital Market Revamp and The Corporate Governance Guide” 26 August 2009Bursa Malaysia Evening Talk: Risk Action Planning: The Missing Elements in ERM Framework 1 October 2009A Framework For STI Policy And Action Plan Round Table Meeting For The Revival of The STI System in Sudan – Khartoum.

3 - 4 March 2010

Seminar on “The Spirit of the Code of Corporate Governance and Corporate Responsibility & Meeting the Needs of Investors: Increasing Transparency, Accountability”

26 May 2010

Some Thoughts On The STI Policy Considerations For The New Economic Model (NEM) ASM International Conference (ASMIC) 2010: Wealth Creation Through Science, Technology And Innovation – Creating The Environment For Technology Innovation, Kuala Lumpur

2 - 3 June 2010

Framework For Science, Technology And Innovation Policy 2nd uNESCO-ISTIC Training Work-shop On STI Policy Development: Assessment of Industry Needs, Kuala Lumpur

21 - 25 June 2010

Participated in ITD Mega Guru Event INNOVATION - Tools & Techniques For Sustainable Growth

28 June 2010

Piong Teck Onn

Seminar on “Capital Market Revamp and The Corporate Governance Guide” 26 August 2009Seminar on “Isolators: Current Issues & Technologies” 10 - 11 September 2009Seminar on “The Spirit of the Code of Corporate Governance and Corporate Responsibility & Meeting the Needs of Investors: Increasing Transparency, Accountability”

26 May 2010

Participated in ISPE Singapore Conference in Association with INTERPHEX Asia 6 - 8 June 2010

Y. Bhg. Datuk Piong Teck Yen

Seminar on “Capital Market Revamp and The Corporate Governance Guide” 26 August 2009Seminar on “The Spirit of the Code of Corporate Governance and Corporate Responsibility & Meeting the Needs of Investors: Increasing Transparency, Accountability”

26 May 2010

Chin Swee ChangSeminar on “Capital Market Revamp and The Corporate Governance Guide” 26 August 2009Seminar on “The Spirit of the Code of Corporate Governance and Corporate Responsibility & Meeting the Needs of Investors: Increasing Transparency, Accountability”

26 May 2010



14

3. Remuneration Committee & Directors’ Remuneration

The Remuneration Committee (RC) is entrusted with the responsibility to assist the Board in reviewing and recommending appropriate and competitive remuneration packages, share options and other benefits applicable to the Directors, taking into TDcountthe Domman<y222 and oidinvidalT2.182 -2.529 Td( )TjEMC 2.182 0 Td[(TIevie95(linevie95(ith )-195(he )-195(calls)-195(for)-195(hranspre ncy)-195(nd )-195(ntoegrty ,)-195(he )-195(oard )-195(periodically)-195(eviewis)-195(he )-195(omman<y222 )2195(evuneration )-195(poicay)-195(o )-195(ensur )-195(fairness)-195(nd )-TJ0T*Dalignendt ith )currndt market bet )pratoices

DirectorPosition

Attendance at Nomination Committee

Meeting 2010 Total

Nov’091.Y. Bhg. Tan Sri Datuk Dr. Omar

bin Abdul RahmanIndependent Non-Executive Director &

Chairman of Remuneration Committee�¥1/12.Omar bin Md. KhirIndependent Non-Executive Director�¥1/1

3.Piong Teck MinNon-Independent Non-Executive Director�¥1/1

4.Piong Teck OnnManaging Director�¥1/1

Total Attendance4 The salient terms of reference for the RC are as follows:i. Composition The RC shall be headed by a non-executive Chairman and its members shall comprise wholly or mainly of non-executive directors.ii. Functions of the RC Without prejudice to the generality of the foregoing, the RC shall:- a. Review, recommend and advise on all forms of directors’ remunerations, for example:�� ‡�� %�D�V�L�F��6�D�O�D�U�\�� ‡�� 3�U�R�I�L�W��6�K�D�U�L�Q�J��6�F�K�H�P�H�V��

�� ‡�� 6�K�D�U�H��2�S�W�L�R�Q�V

�� ‡�� $�Q�\��R�W�K�H�U��E�H�Q�H�I�L�W�V��

b. Structure the component parts of the Executive Directors’ remuneration so as to link rewards to corporate and individual performance; whereas, in the case of Non-Executive Directors, the level of remuneration should reflect the experience and level of responsibilities

undertaken by the particular Non-Executive Director concerned; c. Conduct continued assessment of individual Executive Directors to ensure that remuneration is directly related to performance over time. In this regard, the review of Non-Executive Directors’ fees may take place at a different time of the year from the review of Executive Directors’ salaries;d. Provide an objective and independent assessment of the benefits granted to Executive Directors;e. Consider what other details of Executive Directors’ remuneration to be reported in addition to the existing legal requirements, and how these details should be presented in the Annual Report;



15

Activities of the Remuneration Committee

The RC met once during the year in which Committee members abstained from participating in the discussion of their individual remuneration. In the meeting conducted in the year under review, the RC deliberated and made recommendations of bonus payout to all executive directors and increment of remuneration to the executive directors with effect from 1 January 2010.

Remuneration

Details of remuneration paid by the Group for the financial year ended 30 June 2010 are as follows:


16


18

ADDitiONAL COmPLiANCE iNFORmAtiON

Recurrent Related Party transactions

The details of the Recurrent Related Party Transactions (RRPT) of a revenue and trading nature conducted pursuant to the Shareholders’ Mandate during the financial year ended 30 June 2010 are as follows:-

Name of mandated Related Party

Relationship with the group Nature of transactionsRm


19

Non-audit Fees Paid to External Auditors

During the financial year ended 30 June 2010, non-audit fees paid or payable to external auditors and affiliated firms amounted to RM110,000.

Variation in Results

There was no significant variance between the results for the financial year ended 30 June 2010 as per the audited financial statements and the unaudited results previously announced. The Company did not make any release on profit estimate, forecast or projections for the financial year.

Profit guarantee

There was no profit guarantee given by the Company in respect of the financial year.

material Contracts involving Directors’ and major Shareholders’ interests

Other than RRPT of a revenue in nature as disclosed, there were no material contracts entered into by the Company and its subsidiaries involving Directors’, Major Shareholders’ or connected persons which were still subsisting as at the end of the financial year under review or which were entered into since the end of the previous financial year except as disclosed in the financial statements.

Revaluation of Landed Properties

The Company did not revalue its property, plant and equipment during the financial year ended 30 June 2010, as these assets are carried in the Company’s financial statements at historical cost less accumulated depreciation.



20

introduction

Paragraph 15.26(b) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (Bursa Securities) requires the Board of Directors (Board) of public listed companies to include in its Annual Report a statement about the state of its internal control as a Group.

With this, the Board is pleased to issue the following statement which highlights the nature and scope of the Group’s internal control during the financial year ended 30 June 2010.

Board responsibility

The Board acknowledges its responsibility for the Group’s system of internal control which includes the establishment of an appropriate control environ-ment and framework as well as reviewing its adequacy and integrity. In view of the limitations underlying any system of internal controls which covers financial, operational, compliance controls and risk management procedures, the system is designed mainly to manage, rather than eliminating the risk of failure to achieve the overall Group’s corporate objectives. Accordingly, it can only provide reasonable but not absolute assurance against any material misstatement, loss or fraud.

In accordance with the Statement on Internal Control: Guidance for Directors of Public Listed Companies published in June 2001, the Board upholds that there is an ongoing process for identifying, evaluating and managing significant risks faced by the Group. The Board, through its Audit Committee, regularly reviews the results of this process which has been in place for the year under review and up to the date of issuance of the annual report and financial statements.

Risk management framework

The Board fully supports the contents of the Internal Control Guidance and with the assistance of the outsourced internal auditors, continually reviews the adequacy and integrity of the risk management processes in place. An enterprise risk management project for the Group was carried out during the financial year ended 30 June 2010 to assess and update the Group’s risk. Based on the results presented, an updated risk profile featuring the top 5 key business risks in the Group was put forth to enable Management deploy action plans to better manage the risks and report on an ongoing basis.

The risk management project aims to create awareness among all employees with regards to the internal control components in identifying, evaluating, control, monitoring and reporting of such risks.

internal audit function

The Group’s internal audit function, which is outsourced to an adequately resourced professional firm, assists the Board and the Audit Committee in providing independent assessment of the adequacy, efficiency and effectiveness of the Group’s internal control system. They report directly to the Audit Committee who reviews and approves the internal audit plans to ensure adequate coverage.

Audits are carried out on a risk based approach, in cognisance with the Group’s objectives and policies in the context of its evolving business and regulatory environment, taking into consideration input of the senior management and the Board. Opportunity for improvements to the system of in-ternal control are identified and presented to the Audit Committee via internal audit reports. In addition, the internal audit function also followed up on the implementation of recommendations from previous cycles of internal audit and updated the Audit Committee on the status of Management-agreed action plan implementation.

During the financial year under review, two cycles of internal audit were being carried out for Kotra Pharma (M) Sdn Bhd. The costs incurred for the internal audit function for the financial year ended 30 June 2010 amounted to approximately RM56,000.

Statement On Internal Control


21

Other risk and control processes

Apart from risk management and internal audit, the Board has initiated the following processes to provide assurance to the Board on the proper conduct of the Group’s business operations:

• A process of hierarchical reporting has been established to ensure appropriate segregation of duties and to provide for proper documentation and an auditable trail of accountability.

• A detailed budgeting process is in place requiring all departments to prepare budget and business plan on an annual basis. The Board of Directors reviews and approves the annual budget and business plan in line with the policies and guidelines defined by the Board.

• Regular meetings of the Board, its committees and Management are held to assess and monitor financial performance, short-term and medium-term business plans. The Board also received regular reports that provide them with information required for decision making.

• The professionalism and competency of staff are being emphasized through continuous training and an annual performance evaluation.• Strong emphasis is given to ensure adherence of the manufacturing process to the health, safety and environmental regulations. Standard operat-

ing policies and procedures based on current Good Manufacturing Practice (cGMP) are set out and are updated from time to time in tandem with changes to the business environment or regulatory guidelines.

• A whistle blowing policy is in place to make it easier for members of staff to be able to report irregularities in good faith, without having to fear that their action may have adverse consequences so as safeguard the Group’s integrity and aimed at enhancing the Group’s transparency and under-pinning its system for combating practices that might jeopardize its activities and reputation.

• The Board also ensure the Group’s assets including buildings and machineries are adequately insured to protect against any calamity that would result in material losses to the Group or its subsidiaries.

weaknesses in internal controls that result in material losses

All in all, the Board remains committed and resilient towards establishing a robust system of internal control and is of the opinion that there were no material losses incurred during the year resulting from weaknesses in internal control. Management continues to take measures to strengthen the control environment.

This statement is issued in accordance with the resolution of the Directors dated 27 October 2010.

Conclusion

Pursuant to paragraph 15.23 of the Listing Requirements of Bursa Securities, the external auditor has reviewed this statement for inclusion in the Annual Report of the Group for the year ended 30 June 2010 and reported to the Board that nothing has come to their attention that causes them to believe that the statement is inconsistent with their understanding of the process adopted by the Board in reviewing the adequacy and integrity of the system of internal controls.

Statement On Internal Control


22

The Board is pleased to present the following report of the Audit Committee and its activities during the financial year ended 30 June 2010. The Audit Committee ensures the Group continues to apply high and appropriate standards of corporate governance and complies with the revised Malaysian Code on Corporate Governance.

1. members of the Audit Committee

The Audit Committee consists of three (3) members, the majority of whom are Independent Non-Executive Directors. The Chairman is also an Independent Non-Executive Director and is a member of the Malaysian Institute of Accountants (MIA) and fulfils the requirements as prescribed or approved by Bursa Malaysia.

The members of the Audit Committee are:

• P’ng Beng Hoe (Chairman) – Independent Non-Executive Director• Azhar bin Hussain – Independent Non-Executive Director • Piong Teck Min – Non-Independent Non-Executive Director

2. Attendance of the Audit Committee meetings

During the financial year under review, a total of five (5) meetings were held. The position and attendance of the members are set out as follows:

Director PositionAttendance at Audit Committee meetings 2010

totalAug’09 Oct’09 Nov’09 Feb’10 may’10

1. P’ng Beng Hoe Independent Non-Executive Director & Chairman of Audit Committee

√ √ √ √ √ 5/5

2. Azhar bin HussainIndependent Non-Executive Director

√ √ √ √ √ 5/5

3. Piong Teck MinNon-Independent Non-Executive Director

√ √ √ √ 4/5

Total Attendance 3 3 3 3 2

3. terms of Reference of the Audit Committee

A. Composition of Audit Committee

The Audit Committee will be composed of no fewer than three (3) members all of whom are non-executive directors and majority of whom shall be independent directors. All members of the Audit Committee should be financially literate.

At least one (1) member of the Audit Committee must be a member of the Malaysian Institute of Accountants or if he is a not a member of the Malaysian Institute of Accountants, he must have at least three (3) years’ working experience and;

(i) he/she must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act 1967; or

(ii) he/she must be a member of one of the associations of accountants as specified in Part II of the 1st Schedule of the Accountants Act 1967; or

fulfils such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad.

Subject to endorsement by the Board, the Audit Committee shall elect a Chairman amongst themselves who is an independent director.

Report Of The Audit Committee


23

B. External Audit

The following are the tasks and functions of the Audit Committee concerning external audit:

Consider the appointment of external auditors, the audit fees and any question of resignation or dismissal;1.

Review the adequacy of external audit arrangements, with particular emphasis on the scope and quality of the audit;2.

Review the assistance given by the Company and/or the Group’s officers to the external auditors;3.

4. Review the quarterly and annual financial statements of the Company and its subsidiaries as well as the consolidated financial statements of the Group with management (and the external auditors in respect of the annual financial statements), including the following:

- Any change in accounting policies and practices- Significant adjustments arising from the audit- The going concern assumption- Compliance with accounting standards and other legal requirements;

5. Review the external auditors’ audit report;

6. Review any management letter sent by the Company’s or any of its subsidiaries’ external auditors and management’s response to such letter;

7. Review any letter of resignation from the external auditors of the Company or any of its subsidiaries; and

8. Discuss problems and reservations arising from the interim and final audits, and any matters the auditor may wish to discuss - in the absence of management where necessary.

C. internal Audit

The following are the roles and responsibilities of the Audit Committee concerning internal audit:

1. Review the adequacy of the scope, functions and resources, competency of the internal audit function and that it has the authority to carry out the work;

2. Review the internal audit programme and results of the internal audit process and where necessary ensure that appropriate actions are taken on the recommendations of the internal audit function;

3. Review any appraisal or assessment of the performance of members of the internal audit function;

4. Approve any appointment or termination of senior staff members of the internal audit function; and

5. Take cognizance of resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning.

D. Related Party transaction

The Audit Committee shall review all related-party transactions and potential conflict of interests situations that may arise within the Company or Group.



24

E. Risk management and internal Control

The following are the responsibilities of the Audit Committee concerning risk management and internal control:

1. Review all areas of significant business and financial risk and the arrangements in place to contain those risks to acceptable levels;

2. Review the effectiveness of the system of internal control and management information system within the Company and the Group;

3. Consider the major findings of internal investigations and management’s response; and

4. Consider other topics as defined by the Board.

F. Rights and Powers of the Audit Committee

The Audit Committee shall:

(a) Have explicit authority to investigate any matters within its terms of reference;

(b) Have the resources which it needs to perform its duties;

(c) Have full access to any information which it requires in the course of performing its duties;

(d) Have unrestricted access to the Managing Director and the chief financial officer;

(e) Have direct communication channels with the external auditors and internal auditors;

(f) Be able to obtain independent professional or other advice in the performance of its duties at the cost of the Company;

(g) Be able to invite outsiders with relevant experience to attend its meetings, if necessary; and

(h) Be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors and employees of the Company and/or the Group, whenever deemed necessary.

g. Cooperation from management

The Company and every subsidiary’s management shall provide the fullest co-operation in providing information and resources to the Audit Committee, and in implementing or carrying out all requests made by the Audit Committee.

h. meetings The Committee shall meet at least four (4) times in each financial year. The quorum shall be two (2) members, the majority of members present

must be independent directors.

The finance manager, the head of internal audit and the external auditors (or their representative) are to be invited to attend the committee meetings. Other Board members may also be present upon invitation. However, the committee shall meet with the external auditors without the presence of any executive directors, at least twice a year.

The Company Secretary shall be the Secretary for the Committee and will be responsible for co-ordination of administrative details including calling

the meeting, voting and keeping of minutes.



25

The Chairman shall convene a meeting of the Audit Committee if a request is made by any committee member, the Company’s Managing Director, the internal auditors or external auditors.

The external auditors have the right to appear and to be heard at any meeting of the Audit Committee from time to time and shall appear if so required by the Committee.

Motions put forward to the Audit Committee shall be decided on a majority of votes. Each member shall be entitled to only one vote. The Chairman shall be entitled to a casting vote in the event of an equality in the voting except for a meeting attended by only two members in which the decision must be unanimous in order for the motion to be put through.

i. Review of the Audit Committee

The Board must review the terms of office and performance of the Audit Committee and each of its members at least once every three (3) years to determine whether the Audit Committee and the members have carried out their duties with the terms of reference.

4. Activities of the Audit Committee

During the year under review, the Audit Committee has discharged its duties in accordance with the terms of reference. The following are the list of its completed tasks:

Reviewed the external auditors’ scope of work, audit plans, management letters and fees for the year, for the Company and its subsidiary, •and recommended their reappointment to the Board after evaluating the performance of the external auditors;

Reviewed the Company’s Risk Profile and the management process for identifying, evaluating and managing the significant risks faced by •the Company;

Reviewed the annual report and the Company’s audited financial statements prior to submission for Board consideration and approval. The •review was to ensure that the audited financial statements were drawn up in accordance with the provisions of the Companies Act, 1965 and the applicable accounting standards approved by the Malaysian Accounting Standard Board (MASB);

Reviewed the quarterly and year end financial statements to ensure the Company’s compliance with the Listing Requirements of Bursa •Malaysia, MASB and other relevant legal and regulatory requirements;

Reviewed the internal audit plan, scope of work and the internal auditors’ fees based on the risk management profile of the Group and final •review of all internal audit findings including recommendations made by the internal auditor;

Reviewed the related party transactions entered into by the Company and its subsidiary as well as the disclosure of such transactions in the •Annual Report of the Group and the Circular to Shareholders relating to Shareholders’ Mandate for Recurrent Related Party Transactions prior to recommending it to the Board for approval; and

Reviewed the draft Statement on Internal Control and Corporate Governance Statement and recommended to the Board the extent of the •Group’s compliance with the provisions set out under the Code and in accordance with the Listing Requirements of Bursa Malaysia.



26

5. internal Audit Function

The Company has engaged an external independent internal auditor, Messrs KPMG Business Advisory Sdn Bhd, to carry out internal audit functions effectively and professionally.

The principal responsibility of the internal audit is to undertake independent regular and systematic reviews of the Group’s system of internal controls to provide reasonable assurance that such systems continue to operate effectively and efficiently.

Internal audit functions are elaborated further in the Statement on Internal Control in pages 20 to 21 of this Annual Report.

6. Statement on Employees’ Share Option Scheme (ESOS)

The Listing Requirements of Bursa Malaysia Securities Berhad for the Main Market requires a statement by the Audit Committee in relation to the allocation of the options pursuant to any share scheme for employees as required under Rule 8.17.

There was no new option granted to the eligible Executive Directors and employees of the Group during the financial year under review.

No options had been granted to the Non-Executive Directors since the ESOS took effect.


Financial Statements

28 Directors’ Report

33 Statement by Directors & Statutory Declaration

34 Independent Auditors’ Report

36 Income Statements

37 Balance Sheets

38 Statements of Changes in Equity

39 Cash Flow Statements

41 Notes to the Financial Statements


28

The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 30 June 2010.

PrinciPal activities

The Company is principally involved in investment holding and the provision of management services. The principal activities of its subsidiaries are set out in Note 16 to the financial statements. There have been no significant changes in the nature of these activities during the financial year.

results

Group company

rM’000 rM’000

Profit/(loss) for the year 11,721 (238)

There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financial statements.

In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature.

DiviDenDs

No dividend was paid since the end of previous financial year and the directors do not recommend any final dividend in respect of the current financial year.

Directors

The names of the directors of the Company in office since the date of the last report and at the date of this report are:

Y. Bhg. Tan Sri Datuk Dr. Omar Bin Abdul Rahman, JSM, JMN, DMSM, PSMPiong Teck OnnPiong Teck MinY.Bhg. Datok Piong Teck Yen, DMSM, DSM, PJK, JPChin Swee ChangOmar Bin Md. KhirP’ng Beng Hoe, BKT, PJK, JPAzhar Bin Hussain

Directors’ Report


29

Directors’ interests

According to the register of directors’ shareholdings, the interests of directors holding office at the end of the financial year in shares and options under the ESOS in the Company and its related corporations during the financial year were as follows:-

number of ordinary shares of rM1 each

1.7.2009 acquired sold 30.6.2010

Holding company

Direct interest

Piong Teck Min 10,000 - - 10,000

Piong Teck Onn 51,000 - - 51,000

Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP 10,000 - - 10,000

Deemed interest

Chin Swee Chang 51,000 - - 51,000

number of ordinary shares of rM0.50 each

1.7.2009 acquired sold 30.6.2010

the company

Direct interest

Piong Teck Min 1,276,220 - - 1,276,220

Omar Bin Md. Khir 1,018,060 - 100,000 918,060

Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP 2,200 - - 2,200

Y. Bhg. Tan Sri Datuk Dr. Omar Bin Abdul Rahman, JSM, JMN, DMSM, PSM 4,840 - - 4,840

Indirect interest

Piong Teck Min 64,624,362 - - 64,624,362

Piong Teck Onn 64,624,362 - - 64,624,362

Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP 64,624,362 - - 64,624,362

Deemed indirect interest

Chin Swee Chang 64,624,362 - - 64,624,362

Directors’ Report


30

Directors’ interests (Cont’d)

number of options over ordinary shares of rM0.50 each

1.7.2009 Granted exercised 30.6.2010

the company

Chin Swee Chang 1,800,000 - - 1,800,000

Piong Teck Onn 1,800,000 - - 1,800,000

Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP 1,800,000 - - 1,800,000

By virtue of their interests in the holding company, namely Piong Nam Kim Holdings Sdn Bhd, Chin Swee Chang, Piong Teck Min, Piong Teck Onn and Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP are deemed interested in shares of all the Company’s subsidiaries to the extent the Company has an interest.

None of the other directors in office at the end of the financial year had any interest in shares in the Company or its related corporations during the financial year.

eMPloyees’ sHare oPtions scHeMe

An Employees’ Share Option Scheme (ESOS) was approved by the Securities Commission on 22 April 2003 and the shareholders at an Extraordinary General Meeting held on 10 July 2003.

The principal features of the ESOS are disclosed in Note 23 to the financial statements.

The Company has been granted exemption by the Companies Commission of Malaysia from having to disclose the list of option holders holding share options of less than 400,000 shares.

The eligible employees who have been granted share options of 400,000 or more are as follows:-

no. name of options Holders number of share options

1. Chin Swee Chang 1,800,000

2. Piong Teck Onn 1,800,000

3. Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP 1,800,000

4. Thanasekaran Dorairajah 550,000

5. Alan Martin Lewis 550,000

6. Hiew Mein Foong 440,000

7. Daniel Chua Chong Liang 440,000

Directors’ Report


31

Directors’ benefits

Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate, other than those arising from the share options granted to the directors under the Employees’ Share Option Scheme.

Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors or the fixed salary of a full-time employee of the Company as shown in Note 32(d) to the financial statements) by reason of a contract made by the Company with any director or with a firm of which he is a member, or with a company in which he has a substantial financial interest other than as disclosed in Note 32 to the financial statements.

otHer statutory inforMation

(a) Before the income statements and balance sheets of the Group and of the Company were made out, the directors took reasonable steps:

(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and

(ii) to ensure that any current assets which were unlikely to realise their values as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.

(b) At the date of this report, the directors are not aware of any circumstances which would render:

(i) the amount written off for bad debts or provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; and

(ii) the values attributed to the current assets in the financial statements of the Group and of the Company misleading.

(c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

(d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading.

(e) As at the date of this report, there does not exist:

(i) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or

(ii) any contingent liability of the Group or of the Company which has arisen since the end of the financial year.

(f) In the opinion of the directors:

(i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet its obligations when they fall due; and

(ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made.

Directors’ Report


32

auDitors

The auditors, Messrs. Crowe Horwath (formerly known as Messrs. Horwath), have expressed their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the directors dated 27 October 2010.

Piong teck onn

y. bhg. Datuk Piong teck yen, DMsM, DsM, PJK, JP

Directors’ Report


33

Statement by DirectorsPursuant to Section 169 (15) of the Companies Act, 1965

We, Piong Teck Onn and Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP, being two of the directors of Kotra Industries Berhad, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 36 to 74 are drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 30 June 2010 and of the results and the cash flows of the Group and of the Company for the year then ended.

Signed on behalf of the Board in accordance with a resolution of the directors dated 27 October 2010.

Piong teck onn y. bhg. Datuk Piong teck yen, DMsM, DsM, PJK, JP

I, Daniel Chua Chong Liang, being the officer primarily responsible for the financial management of Kotra Industries Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 36 to 74 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act 1960.

Subscribed and solemnly declared by the abovenamed Daniel Chua Chong Liang, at Melaka in the State of Melaka on 27 October 2010 Daniel chua chong liang

Before me,

Statutory DeclarationPursuant to Section 169 (16) of the Companies Act, 1965


34

Independent Auditors’ Reportto the members of KOTRA INDUSTRIES BERHAD (Incorporated in Malaysia) Company No: 497632-P

rePort on tHe financial stateMents

We have audited the financial statements of Kotra Industries Berhad, which comprise the balance sheets as at 30 June 2010 of the Group and of the Company, and the income statements, statements of changes in equity and cash flow statements of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 36 to 74.

Directors’ Responsibility for the Financial Statements

The directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia. This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal controls relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and the Company as of 30 June 2010 and of their financial performance and cash flows for the financial year then ended.


35

Independent Auditors’ Report

rePort on otHer leGal anD reGulatory requireMents

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:-

(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries have been properly kept in accordance with the provisions of the Act;

(b) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes; and

(c) Our audit reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.

otHer Matters

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

crowe Horwath onn Kien HoeFirm No.: AF 1018 Approval No :1772/11/10(J/PH)Chartered Accountants Chartered Accountant

Melaka

27 October 2010


36

Income Statementsfor the financial year ended 30 June 2010

Group company

note 2010 2009 2010 2009

rM’000 rM’000 rM’000 rM’000

Revenue 5 102,357 89,994 300 300

Other operating income 6 2,506 3,552 21 5

Raw materials and consumables used (36,492) (34,413) - -

Changes in inventories of finished goods and work in progress 3,081 2,558 - -

Employee benefits expenses 7 (23,648) (20,715) (226) (288)

Selling and distribution expenses (21,554) (22,401) - -

Depreciation and amortisation (2,952) (2,585) - -

Other operating expenses (9,985) (6,400) (332) (322)

Finance costs 8 (847) (605) (1) (5)

Profit/(loss) before tax 9 12,466 8,985 (238) (310)

Income tax (expense)/credit 10 (745) 139 - 4

Profit/(loss) for the year 11,721 9,124 (238) (306)

earnings per share attributable to equity holders of the company (sen):

- Basic 11 9.5 7.4

- Diluted 11 9.5 7.4

The accompanying notes form an integral part of the financial statements.


37

Balance Sheetsas at 30 June 2010

Group company

note 2010 2009 2010 2009

rM’000 rM’000 rM’000 rM’000

assets

non-current assets

Property, plant and equipment 12 159,379 120,493 - -

Investment properties 13 1,649 1,675 - -

Prepaid land lease payments 14 4,397 4,449 - -

Development expenditure 15 906 671 - -

Investment in subsidiaries 16 - - 90,443 78,482

Deferred tax assets 17 - 750 - -

166,331 128,038 90,443 78,482

current assets

Inventories 18 28,227 21,111 - -

Trade receivables 19 37,629 30,464 - -

Other receivables 20 2,053 8,266 1 1

Amounts due from subsidiaries 21 - - 12,445 12,576

Tax recoverable 225 119 14 11

Cash and bank balances 22 8,132 8,562 28 69

76,266 68,522 12,488 12,657

total assets 242,597 196,560 102,931 91,139

equity and liabilities

equity attributable to equity holder of the company

Share capital 23 61,903 61,903 61,903 61,903

Reserves 314 317 36,796 24,838

Retained earnings 27 40,610 28,886 4,130 4,365

total equity 102,827 91,106 102,829 91,106

non-current liabilities

Deferred income 28 20 46 - -

Borrowings 29 85,194 63,045 - -

85,214 63,091 - -

current liabilities

Borrowings 29 29,561 13,289 - -

Trade payables 30 15,852 18,868 - -

Other payables 31 9,143 10,206 102 33

54,556 42,363 102 33

total liabilities 139,770 105,454 102 33

total equity and liabilities 242,597 196,560 102,931 91,139



38

Statements of Changes in Equityfor the financial year ended 30 June 2010

non-distributable Distributable share

capital (note 23)

share premium (note 24)

share option reserve

(note 25) retained earnings

total equity

rM’000 rM’000 rM’000 rM’000 rM’000

Group

At 1 July 2008 61,903 3 241 19,762 81,909

Profit for the year - - - 9,124 9,124

Share options granted under ESOS - - 73 - 73

At 30 June 2009 61,903 3 314 28,886 91,106

Profit for the year - - - 11,721 11,721

Share options lapsed - - (3) 3 -

At 30 June 2010 61,903 3 311 40,610 102,827

share capital

(note 23)

non-distributable Distributable

total equity

share premium (note 24)

share option reserve

(note 25)

other reserve

(note 26)

retained earnings (note 27)

rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

company

At 1 July 2008 61,903 3 241 15,091 4,671 81,909

Net gain arising from fair value of the investment in subsidiary recognised directly in equity - - - 9,430 - 9,430

Loss for the year - - - - (306) (306)

Share options granted under ESOS - - 73 - - 73

At 30 June 2009 61,903 3 314 24,521 4,365 91,106

Net gain arising from fair value of the investment in subsidiary recognised directly in equity - - - 11,961 - 11,961

Loss for the year - - - - (238) (238)

Share options lapsed - - (3) - 3 -

At 30 June 2010 61,903 3 311 36,482 4,130 102,829



39

Cash Flow Statementsfor the financial year ended 30 June 2010

Group company

2010 2009 2010 2009

rM’000 rM’000 rM’000 rM’000

Cash flows from/(for) operating activities

Profit/(loss) before tax 12,466 8,985 (238) (310)

Adjustments for :

Bad debts written off 1 148 - -

Bad and doubtful debts recovered (213) (17) - -

Depreciation and amortisation:

- property, plant and equipment 2,875 2,509 - -

- investment properties 26 26 - -

- prepaid land lease payments 52 51 - -

- deferred income (26) (26) - -

- development expenditure 17 15 - -

Gain on disposal of property, plant and equipment (33) (15) - -

Interest expense 781 526 - -

Interest income (47) (97) - -

Inventories written down 933 657 - -

Provision for doubtful debts 294 584 - -

Rental income (33) (62) - -

Share-based payment under ESOS - 73 - 73

Unrealised loss/(gain) on foreign exchange 1,031 (986) - -

Operating profit/(loss) before working capital changes 18,124 12,371 (238) (237)

Increase in inventories (8,049) (4,725) - -

Increase in receivables (1,950) (2,567) - 17

(Decrease)/increase in payables (4,079) 8,133 69 (6)

Cash generated from/(used in) operations 4,046 13,212 (169) (226)

Interest paid (781) (526) - -

Tax paid (101) (103) (3) (1)

Net cash generated from/(used in) operating activities 3,164 12,583 (172) (227)


40

Cash Flow Statements

Group company

2010 2009 2010 2009

rM’000 rM’000 rM’000 rM’000

Cash flows for investing activities

Interest received 47 97 - -

Proceeds from disposal of property, plant and equipment 36 15 - -

Rental received 33 62 - -

Development expenditure paid (252) (258) - -

Purchase of property, plant and equipment (37,490) (85,555) - -

Net cash used in investing activities (37,626) (85,639) - -

Cash flows from financing activities

Drawdown of term loans 26,388 59,929 - -

Proceeds from other short term borrowings 7,422 5,435 - -

Interest paid (4,274) (1,050) - -

Repayment of hire purchase payable (15) (16) - -

Repayment from a subsidiary - - 131 253

Net cash generated from financing activities 29,521 64,298 131 253

Net (decrease)/increase in cash and cash equivalents (4,941) (8,758) (41) 26

effects of exchange rate changes on cash and cash equivalents (115) 261 - -

Cash and cash equivalents at beginning of the financial year 4,770 13,267 69 43

Cash and cash equivalents at end of the financial year (Note 22) (286) 4,770 28 69



41

Notes to the Financial Statements30 June 2010

1. corPorate inforMation

The Company is a public limited liability company incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia Securities Berhad. The principal place of business is located at No. 1, Jalan TTC 12, Cheng Industrial Estate, 75250 Melaka.

The Company is principally involved in investment holding and the provision of management services. The principal activities of its subsidiaries are set out in Note 16 to the financial statements. There have been no significant changes in the nature of these activities during the financial year.

The holding company is Piong Nam Kim Holdings Sdn Bhd, a company incorporated in Malaysia, which the directors also regard as the ultimate holding company.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 27 October 2010.

2. financial risK ManaGeMent Policies

The Group’s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group’s business whilst managing its market, credit, liquidity and cash flow risks. The policies in respect of the major areas of treasury activity are as follows:-

(a) Market risk

(i) foreign currency risk

The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than Ringgit Malaysia.

Foreign currency risk is closely monitored and kept at an acceptable level.

As at balance sheet date, the Group has entered into forward foreign exchange contracts with the following notional amounts and maturities:

notional amount

2010 2009

rM’000 rM’000

Maturities less than 1 year:

Foreign Exchange Contract to sell USD 4,844 2,966

Foreign Exchange Contract to buy Euro 5,232 -

10,076 2,966

(ii) interest rate risk

The Group obtains financing through bank borrowings. Its policy is to obtain the most favourable interest rates available.

Information relating to the Group’s borrowings are disclosed in their respective notes.


42

2. financial risK ManaGeMent Policies (Cont’d)

(b) credit risk

Credit risks, or the risk of counterparties defaulting, are controlled by the application of credit approvals, limits and monitoring procedures. Credit risks are minimised by monitoring receivables regularly and by mostly trading with creditworthy customers.

The carrying amounts of cash and cash equivalents, trade receivables and other receivables represent the Group’s maximum exposure to credit risk in relation to financial assets. No other financial assets carry a significant exposure to credit risk.

(c) Liquidity and cash flow risks

The Group manages its liquidity risk by maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities to meet estimated commitments arising from operational expenditure and financial liabilities. The Group also has an effective control of cash management to ensure that the Group can pay its operating expenses and targeted dividends to shareholders at appropriate times.

3. basis of PreParation

The financial statements of the Group are prepared under the historical cost convention and modified to include other bases of valuation as disclosed in other sections under significant accounting policies, and in compliance with Financial Reporting Standards (FRSs) and the Companies Act, 1965 in Malaysia.

During the current financial year, the Group has adopted FRS 8, Operating Segments, being the Financial Reporting Standard effective for financial periods beginning on or after 1 July 2009. FRS 8 replaces FRS 114

2004 Segment Reporting and requires a “management approach”, under which segment information is

presented on the same basis as that used for internal reporting purposes. The adoption of this new Standard only impacts the form and content of disclosures presented in the financial statements.

At the date of authorisation of these financial statements, the following new FRSs and Interpretations, and amendments to certain Standards and Interpretations were issued but not yet effective and have not been applied by the Group:

Effective for financial periods beginning on or after 1 January 2010

• FRS 4: Insurance Contracts• FRS 7: Financial Instruments: Disclosures• Revised FRS 101 (2009): Presentation of Financial Statements• Revised FRS 139 (2010): Financial Instruments: Recognition and Measurement• Amendments to FRS 1: First-time Adoption of Financial Reporting Standards and FRS 127: Consolidated and Separate Financial Statements: Cost of an

Investment in a Subsidiary, Jointly Controlled Entity or Associate • Amendments to FRS 2: Share-based Payment - Vesting Conditions and Cancellations • Amendments to FRS 132: Financial Instruments: Presentation and FRS 101: Presentation of Financial Statements - Puttable Financial Instruments and

Obligations Arising on Liquidation• Amendments to FRS 139: Financial Instruments: Recognition and Measurement, FRS 7: Financial Instruments: Disclosures and IC Interpretation 9:

Reassessment of Embedded Derivatives• Improvements to FRSs (2009)• IC Interpretation 9: Reassessment of Embedded Derivatives• IC Interpretation 10: Interim Financial Reporting and Impairment• IC Interpretation 11: FRS 2 - Group and Treasury Share Transactions• IC Interpretation 13: Customer Loyalty Programmes• IC Interpretation 14: FRS 119 - The Limit on a Defined Benefits Asset, Minimum Funding Requirements and their Interaction• TR i - 3: Presentation of Financial Statement of Islamic Financial Institutions

Notes to the Financial Statements


43


3. basis of PreParation (Cont’d)

Effective for financial periods beginning on or after 1 March 2010

• Amendments to FRS 132 Financial Instruments: Presentation - Classification of Rights Issues

Effective for financial periods beginning on or after 1 July 2010

• Revised FRS 1 (2010): First-time Adoption of Financial Reporting Standards• Revised FRS 3 (2010): Business Combinations• Revised FRS 127 (2010): Consolidated and Separate Financial Statements• Amendments to FRS 2: Share-based Payment• Amendments to FRS 5: Non-current Assets Held for Sale and Discontinued Operations - Plan to Sell the Controlling Interest in a Subsidiary• Amendments to FRS 138: Intangible Assets• IC Interpretation 12: Service Concession Arrangement• IC Interpretation 16: Hedges of Net Investment in a Foreign Operation• IC Interpretation 17: Distributions of Non-cash Assets to Owners• Amendment to IC Interpretation 9: Reassessment of Embedded Derivatives

Effective for financial periods beginning on or after 1 January 2011

• Amendments to FRS 1: First-time Adoption of Financial Reporting Standards - Limited Exemption from Comparative FRS 7 Disclosures for First-time Adopters - Additional Exemptions for First-time Adopters

• Amendments to FRS 2: Share-based Payment - Group Cash-settled Share-based Payment Transactions• Amendments to FRS 7: Financial Instruments: Disclosures - Improving Disclosures about Financial Instruments• IC Interpretation 4: Determining Whether An Arrangement Contains a Lease• IC Interpretation 18: Transfer of Assets from Customers• TR 3: Guidance on Disclosures of Transition to IFRSs• TR i - 4: Shariah Compliant Sale Contracts

The Group plan to adopt the above pronouncements when they become effective in the respective financial period. The adoption of these pronouncements are expected to have no material impact on the financial statements of the Group and of the Company upon their initial application except for the following:

frs 7: financial instruments: Disclosures, frs 139: financial instruments: recognition and Measurement and subsequent amendments to frs 7 and frs 139

FRS 7: Financial Instruments: Disclosures is a new Standard that requires new disclosures in relation to financial instruments. The Standard is considered to result in increased disclosures, both quantitative and qualitative of the Group’s exposure to risks, enhanced disclosure regarding components of the Group and of the Company’s financial position and performance, and possible changes to the way of presenting certain items in the financial statements.

The new Standard on FRS 139: Financial Instruments: Recognition and Measurement establishes principles for recognising and measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. Requirements for presenting information about financial instruments are in FRS 132: Financial Instruments: Presentation and the requirements for disclosing information about financial instruments are in FRS 7: Financial Instruments: Disclosures.

The possible impact of FRS 139 and FRS 7 on the financial statements upon their initial application are not disclosed by virtue of the exemptions given in these respective FRSs.


44


3. basis of PreParation (Cont’d)

revised frs 101 (2009): Presentation of financial statements

The revised FRS 101 (2009) introduces the statement of comprehensive income: presenting all items of income and expense recognised in the income statement, together with all other items of recognised income and expense, either in one single statement, or in two linked statements. In addition, a statement of financial position is required at the beginning of the earliest comparative period following a change in accounting policy, the correction of an error or the reclassification of items in the financial statements. The adoption of this revised FRS will only impact the form and content of the presentation of the Group and of the Company’s financial statements in the next financial year.

improvements to frss (2009)

Improvements to FRSs (2009) contain amendments to 21 accounting standards that result in accounting changes for presentation, recognition or measurement purposes and terminology or editorial amendments. These amendments are expected to have no material impact on the financial statements of the Group and of the Company upon their initial application except for leasehold land where in substance a finance lease will be reclassified from ‘prepaid land lease payments’ to ‘property, plant and equipment’ and measured as such retrospectively.

4. siGnificant accountinG Policies

(a) critical accounting estimates and judgements

Estimates and judgements are continually evaluated by the directors and management and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and judgements that affect the application of the Group’s accounting policies and disclosures, and have a significant risk of causing a material adjustment to the carrying amounts of assets, liabilities, income and expenses are discussed below.

(i) Depreciation of property, plant and equipment

The estimates for the residual values, useful lives and related depreciation charges for the property, plant and equipment are based on commercial and production factors which could change significantly as a result of technical innovations and competitors’ actions in response to the market conditions.

The Group anticipates that the residual values of its property, plant and equipment will be insignificant. As a result, residual values are not being taken into consideration for the computation of the depreciable amount.

Changes in the expected level of usage and technological development could impact the economic useful lives and/or the residual values of these assets, therefore future depreciation charges could be revised.

(ii) Income taxes

There are certain transactions and computations for which the ultimate tax determination may be different from the initial estimate. The Group recognises tax liabilities based on its understanding of the prevailing tax laws and estimates of whether such taxes will be due in the ordinary course of business. Where the final outcome of these matters is different from the amounts that were initially recognised, such difference will impact the income tax and deferred tax provisions in the period in which such determination is made.


45


4. siGnificant accountinG Policies (Cont’d)

(a) critical accounting estimates and judgements (Cont’d)

(iii) Impairment of assets

When the recoverable amount of an asset is determined based on the estimate of the value-in-use of the cash-generating unit to which the asset is allocated, the Group is required to make an estimate of the expected future cash flows from the cash-generating unit and also to apply a suitable discount rate in order to determine the present value of those cash flows.

(iv) Amortisation of development costs

Changes in the expected level of usage and technological development could impact the economic useful lives. Therefore future amortisation charges could be revised.

(v) Provision for doubtful debts

The Group makes provision for doubtful debts based on an assessment of the recoverability of receivables. Provisions are applied to receivables where events or changes in circumstances indicate that the carrying amounts may not be recoverable. Management specifically analyses historical bad debt, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment terms when making a judgement to evaluate the adequacy of the provision for doubtful debts of receivables. Where the expectation is different from the original estimate, such difference will impact the carrying value of receivables.

(vi) Allowance for inventories

Reviews are made periodically by management on damaged, obsolete and slow-moving inventories. These reviews require judgement and estimates. Possible changes in these estimates could result in revisions to the valuation of inventories.

(vii) Fair values estimates for certain financial assets and liabilities

The Group carries certain financial assets and liabilities at fair value, which require extensive use of accounting estimates and judgement. While significant components of fair value measurement were determined using verifiable objective evidence, the amount of changes in fair value would differ if the Group uses different valuation methodologies. Any changes in fair value of these assets and liabilities would affect profit and equity.

(b) functional and foreign currency

(i) Functional and presentation currency

The functional currency of each entity in the Group is the currency of the primary economic environment in which the entity operates.

The financial statements are presented in Ringgit Malaysia (RM) which is the Group’s functional and presentation currency.

(ii) Transactions and balances

Transactions in foreign currency are converted into RM at the approximate rates of exchange ruling at the transaction dates. Transactions in foreign currency are measured in the respective functional currencies of the Group and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities at the balance sheet date are translated at the rates ruling as of that date. Non-monetary assets and liabilities are translated using exchange rates that existed when the values were determined. All exchange differences are taken to the income statement.


46



(c) financial instruments

Financial instruments are recognised in the balance sheet when the Group has become a party to the contractual provisions of the instruments.

Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument classified as a liability, are reported as an expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity.

Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.

Financial instruments recognised in the balance sheet are disclosed in the individual policy statement associated with each item.

(d) basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries made up to 30 June 2010.

A subsidiary is defined as a company in which the parent company has the power, directly or indirectly, to exercise control over its financial and operating policies so as to obtain benefits from its activities.

All the subsidiaries are consolidated using the purchase method. Under the purchase method, the results of subsidiaries acquired or disposed off are included from the date of acquisition or up to the date of disposal. At the date of acquisition, the fair values of the subsidiaries’ net assets are determined and these values are reflected in the consolidated financial statements. The cost of acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination.

Intragroup transactions, balances and unrealised gains on transactions are eliminated; unrealised losses are also eliminated unless cost cannot be recovered. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group.

(e) investment in subsidiaries

Investment in subsidiaries are stated at fair value in the balance sheet of the Company, and is reviewed for impairment at the end of the financial year if events or changes in circumstances indicate that the carrying value may not be recoverable.

On the disposal of such investments, the difference between the net disposal proceeds and the carrying amount of the investments is taken to the income statement.

(f) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any.


47



(f) Property, plant and equipment (Cont’d)

Depreciation is calculated under the straight-line method to write off the depreciable amount of the assets over their estimated useful lives. Depreciation of an asset does not cease when the asset becomes idle or is retired from active use unless the asset is fully depreciated. The principal annual rates used for this purpose are:-

Industrial buildings and installations 2% - 10% Machinery and equipment 10% Motor vehicles 10% Office equipment 10% Computer equipment 20% Furniture and fittings 10% Renovation 10%

The depreciation method, useful life and residual values are reviewed, and adjusted if appropriate, at each balance sheet date to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of the property, plant and equipment.

Building and machinery under construction represents assets which are not ready for commercial use at the balance sheet date. Building and machinery under construction are stated at cost, and are depreciated accordingly when the assets are completed and ready for commercial use.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising from derecognition of the asset is included in the income statement in the year the asset is derecognised.

(g) borrowing costs

Borrowing costs incurred on the construction of property, plant and equipment which require a period of time to get them ready for their intended use are capitalised and included as part of the cost of the related assets.

For borrowing associated with a specific asset, the actual rate on that borrowing is used. Otherwise, a weighted average cost of borrowings is used.

All other borrowing costs are charged to the income statement as expenses in the period in which they are incurred.

(h) investment properties

Investment properties are property held either to earn rental income or for capital appreciation or for both. Investment properties are stated at cost less accumulated depreciation and impairment losses, if any, consistent with the accounting policy for property, plant and equipment as stated in Note 4 (f) to the financial statement.

Investment properties are derecognised when they have either been disposed off or when the investment property is permanently withdrawn from use and no future benefit is expected from its disposal.

On the derecognition of an investment property, the difference between the net disposal proceeds and the carrying amount is charged to the income statement.


48



(i) impairment of assets

The carrying values of assets, other than financial assets, inventories and deferred tax assets, are reviewed at each balance sheet date for impairment when there is an indication that the assets might be impaired. Impairment is measured by comparing the carrying values of the assets with their recoverable amounts. The recoverable amount of the assets is the higher of the assets’ net selling price and its value-in-use, which is measured by reference to discounted future cash flow.

An impairment loss is charged to the income statement immediately.

In respect of assets other than goodwill, and when there is a change in the estimates used to determine the recoverable amount, a subsequent increase in the recoverable amount of an asset is treated as a reversal of the previous impairment loss and is recognised to the extent of the carrying amount of the asset that would have been determined (net of amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in the income statement immediately.

(j) Prepaid land lease payments

The prepaid land lease payments comprise the up-front payments made for the leasehold interest in land and are amortised on a straight line basis over the lease terms.

(k) research and development expenditure

Research expenditure is recognised as an expense when it is incurred.

Development expenditure is recognised as an expense except that expenditure incurred on development projects are capitalised as long-term assets to the extent that such expenditure is expected to generate future economic benefits. Development expenditure is capitalised if, and only if an entity can demonstrate all of the following:-

(i) its ability to measure reliably the expenditure attributable to the asset under development;

(ii) the product or process is technically and commercially feasible;

(iii) its future economic benefits are probable;

(iv) its ability to use or sell the developed asset; and

(v) the availability of adequate technical, financial and other resources to complete the asset under development.

Capitalised development expenditure is measured at cost less accumulated amortisation and impairment losses, if any. Development expenditure initially recognised as an expense are not recognised as assets in the subsequent period.

The development expenditure is amortised on a straight-line method over a period of not exceeding 5 years when the products are ready for sale or use. In the event that the expected future economic benefits are no longer probable of being recovered, the development expenditure is written down to its recoverable amount.


49



(l) assets acquired under hire purchase

Plant and equipment acquired under hire purchase are capitalised in the financial statements. Each hire purchase payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding outstanding obligations due under the hire purchase after deducting finance charges are included as liabilities in the financial statements.

Finance charges are allocated to the income statement over the period of the respective hire purchase agreements.

Plant and equipment acquired under hire purchase are depreciated over the useful lives of the assets.

(m) Provisions

Provisions are recognised when the Company has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as finance cost.

(n) inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on the weighted average basis, and comprises the purchase price and incidentals incurred in bringing the inventories to their present location and condition. Cost of finished goods and work-in-progress includes the cost of materials, labour and an appropriate proportion of production overheads.

Net realisable value represents the estimated selling price less the estimated costs of completion and the estimated costs necessary to make the sale. Where necessary, due allowance is made for all damaged, obsolete and slow-moving items.

(o) receivables

Receivables are carried at anticipated realisable value. Bad debts are written off in the period in which they are identified. An estimate is made for doubtful debts based on a review of all outstanding amounts at the balance sheet date.

(p) Payables

Payables are stated at cost which is the fair value of the consideration to be paid in the future for goods and services received.

(q) income taxes

Income taxes for the year comprise current and deferred tax.

Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted or substantively enacted at the balance sheet date.

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.


50



(q) income taxes (Cont’d)

Deferred tax liabilities are recognised for all taxable temporary differences other than those that arise from goodwill or excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the business combination costs or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit.

Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on the tax rates that have been enacted or substantively enacted at the balance sheet date.

Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also charged or credited directly to equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the business combination costs. The carrying amounts of deferred tax assets are reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient future taxable profits will be available to allow all or part of the deferred tax assets to be utilised.

(r) Government grants

Government grants are recognised at fair value when there is reasonable assurance that the Group will comply with the conditions attaching to them and the grants will be received. Grants related to purchase of assets are treated as deferred income and allocated to income statement over the useful lives of the related assets while grants related to expenses are treated as other income in the income statement.

(s) equity instruments

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from proceeds.

Dividends on ordinary shares are recognised as liabilities when approved for appropriation.

(t) cash and cash equivalents

Cash and cash equivalents comprise cash in hand, bank balances, demand deposits, bank overdrafts and short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(u) segmental information

Segment revenues and expenses are those directly attributable to the segments and include any joint revenue and expenses where a reasonable basis of allocation exists. Segment assets include all assets used by a segment and consist principally of property, plant and equipment (net of accumulated depreciation, where applicable), other investments, inventories, receivables, and cash and bank balances.

Most segment assets can be directly attributed to the segments on a reasonable basis. Segment assets do not include income tax assets, whilst segment liabilities do not include income tax liabilities and borrowings from financial institutions.

Segment revenue, expenses and results include transfers between segments. The prices charged on intersegment transactions are based on normal commercial terms. These transfers are eliminated on consolidation.


51



(v) Employee benefits

(i) Short-term benefits

Wages, salaries, paid annual leave, bonuses and non-monetary benefits are accrued in the period in which the associated services are rendered by employees of the Group.

(ii) Defined contribution plans

The Group’s contributions to defined contribution plans are charged to the income statement in the period to which they relate. Once the contributions have been paid, the Group has no further liability in respect of the defined contribution plans.

(iii) Share-based payment transactions

At grant date, the fair value of options granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period in which the employees become unconditionally entitled to the options. The amount recognised as an expense is adjusted to reflect the actual number of share options that are expected to vest.

(w) related parties

A party is related to an entity if:-

(i) directly, or indirectly through one or more intermediaries, the party:-• controls, is controlled by, or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries);• has an interest in the entity that gives it significant influence over the entity; or• has joint control over the entity;

(ii) the party is an associate of the entity;

(iii) the party is a joint venture in which the entity is venturer;

(iv) the party is a member of the key management personnel of the entity or its parent;

(v) the party is a close member of the family of any individual referred to in (i) or (iv);

(vi) the party is an entity that is controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (iv) or (v); or

(vii) the party is a post-employment benefit plan for the benefit of employees of the entity, or of any entity that is related party of the entity.


52



(x) contingent liabilities and contingent assets

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably.

A contingent liability is not recognised but is disclosed in the notes to the financial statements. When a change in the probability of an outflow occurs so that the outflow is probable, it will then be recognised as a provision.

A contingent asset is a probable asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly within the control of the Group.

(y) revenue recognition

(i) Sale of goods

Sales are recognised upon the transfer of risks and rewards of ownership of goods and net of returns and trade discounts.

(ii) Interest income

Interest income is recognised on an accrual basis.

(iii) Management fee

Management fee is recognised on an accrual basis.

(iv) Rental income

Rental income is recognised on an accrual basis.

5. revenue

Group company

2010 2009 2010 2009

rM’000 rM’000 rM’000 rM’000

Sale of goods 102,357 89,994 - -

Management fees - - 300 300

102,357 89,994 300 300


53


6. otHer oPeratinG incoMe

Group company

2010 2009 2010 2009

rM’000 rM’000 rM’000 rM’000

Amortisation of deferred income 26 26 - -

Bad and doubtful debts recovered 213 17 - -

Gain on foreign currency exchange:

- realised 2,032 2,080 - -

- unrealised - 986 - -

Gain on disposal of property, plant and equipment 33 15 - -

Interest income 47 97 - -

Rental income 33 62 - -

Miscellaneous 122 269 21 5

2,506 3,552 21 5

7. eMPloyee benefits exPenses

Group company

2010 2009 2010 2009

rM’000 rM’000 rM’000 rM’000

Short-term employee benefits 20,760 18,016 221 211

Contributions to defined contribution plan 1,873 1,649 5 4

Share options granted under ESOS (Note 25) - 73 - 73

Other personnel expenses 1,015 977 - -

23,648 20,715 226 288

Included in employee benefits expenses are key management personnel compensation as disclosed in Note 32(d) to the financial statements.

8. finance costs

Group company

2010 2009 2010 2009

rM’000 rM’000 rM’000 rM’000

Interest expense on:

- Term loan 4,311 1,082 - -

- Other bank borrowings 810 573 1 5

5,121 1,655 1 5

Less: Interest expense capitalised in property, plant and equipment (4,274) (1,050) - -

Interest expense recognised in the income statement 847 605 1 5


54


9. Profit/(Loss) bEforE tax

The following amounts have been included in arriving at profit/(loss) before tax:

Group company

2010 2009 2010 2009

rM’000 rM’000 rM’000 rM’000

Auditors’ remuneration:

- statutory audit 43 42 12 12

- other services 110 40 66 13

Bad debts written off 1 148 - -

Depreciation and amortisation:

- property, plant and equipment 2,875 2,509 - -

- investment properties 26 26 - -

- prepaid land lease payments 52 51 - -

- development expenditure 17 15 - -

Directors’ remuneration:

- fees 182 173 182 173

- emoluments 1,408 1,582 - -

- other short term employee benefits 162 150 - -

Inventories written down 933 657 - -

Loss on foreign exchange:

- realised 1,084 - - -

- unrealised 1,031 - - -

Provision for doubtful debts 294 584 - -

Rental of equipment 39 28 - -

Rental of premises 231 204 - -

Research and development expenses 425 191 - -


55


10. iNCoME tax ExPENsE/(CrEdit)

Group company

2010 2009 2010 2009

rM’000 rM’000 rM’000 rM’000

Current income tax:

Tax expense for the year 6 33 - -

Over provision in prior years (11) (35) - (4)

(5) (2) - (4)

Deferred tax (Note 17):

Relating to origination and reversal of temporary differences - (8) - -

Under provision of deferred tax credit in prior years - (129) - -

Reversal of deferred tax asset 750 - - -

750 (137) - -

Total income tax expense/(credit) 745 (139) - (4)

The deferred tax asset has been reversed during the financial year as the Group does not expect it to be realised in the foreseeable future due to the expected availability of additional tax incentives.

A reconciliation of income tax expense applicable to profit/(loss) before tax at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and of the Company is as follows:

2010 2009

rM’000 rM’000

Group

Profit before tax 12,466 8,985

Taxation at Malaysian statutory tax rate of 25% 3,117 2,247

Effect of income not subject to tax - (246)

Effect of expenses not deductible for tax purposes 192 285

Effect of double deduction tax incentives (3,303) (2,261)

Over provision of income tax in prior years (11) (35)

Under provision of deferred tax credit in prior years - (129)

Reversal of deferred tax assets 750 -

Income tax expense/(credit) 745 (139)


56


10. iNCoME tax ExPENsE/(CrEdit) (Cont’d)

2010 2009

rM’000 rM’000

company

Loss before tax (238) (310)

Taxation at Malaysian statutory tax rate of 25% (60) (77)

Effect of expenses not deductible for tax purposes 60 77

Over provision of income tax in prior years - (4)

Income tax expense/(credit) - (4)

11. earninGs Per sHare

The basic earnings per share for the financial year is arrived at by dividing the Group’s profit after tax of RM11,721,000 (2009: RM9,124,000) by the weighted average number of ordinary shares of RM0.50 each in issue during the financial year of 123,806,000 (2009: 123,806,000).

The effect on the diluted earnings per share for the current financial year arising from the assumed conversion of the existing ESOS is anti-dilutive. Accordingly, the diluted earnings per share for the current financial year is presented as equal to basic earnings per share.

12. ProPerty, Plant anD equiPMent

costaccumulateddepreciation

carryingamount

rM’000 rM’000 rM’000

at 30 June 2010

Industrial buildings and installations 14,455 (3,598) 10,857

Machinery and equipment 21,216 (13,737) 7,479

Motor vehicles 2,089 (1,357) 732

Office equipment 625 (438) 187

Computer equipment 3,883 (2,025) 1,858

Furniture and fittings 969 (702) 267

Renovation 130 (35) 95

Building and machinery under construction 137,904 - 137,904

Total at 30 June 2010 181,271 (21,892) 159,379


57


12. ProPerty, Plant anD equiPMent (Cont’d)

accumulated carrying

cost depreciation amount

rM’000 rM’000 rM’000

at 30 June 2009

Industrial buildings and installations 14,455 (3,261) 11,194

Machinery and equipment 20,378 (12,012) 8,366

Motor vehicles 2,091 (1,374) 717

Office equipment 596 (402) 194

Computer equipment 3,433 (1,455) 1,978

Furniture and fittings 967 (641) 326

Renovation 119 (22) 97

Building and machinery under construction 97,621 - 97,621

Total at 30 June 2009 139,660 (19,167) 120,493

carrying carrying

amount as at Depreciation amount as at

1.7.2009 additions Disposals charges 30.6.2010

rM’000 rM’000 rM’000 rM’000 rM’000

Industrial buildings and installations 11,194 - - (337) 10,857

Machinery and equipment 8,366 838 - (1,725) 7,479

Motor vehicles 717 143 - (128) 732

Office equipment 194 29 - (36) 187

Computer equipment 1,978 458 (3) (575) 1,858

Furniture and fittings 326 2 - (61) 267

Renovation 97 11 - (13) 95

Building and machinery under construction 97,621 40,283 - - 137,904

Total 120,493 41,764 (3) (2,875) 159,379


58


12. ProPerty, Plant anD equiPMent (Cont’d)

carrying carrying

amount as at Depreciation amount as at

1.7.2008 additions charges 30.6.2009

rM’000 rM’000 rM’000 rM’000

Industrial buildings and installations 11,532 - (338) 11,194

Machinery and equipment 9,468 569 (1,671) 8,366

Motor vehicles 767 72 (122) 717

Office equipment 212 16 (34) 194

Computer equipment 791 1,458 (271) 1,978

Furniture and fittings 364 23 (61) 326

Renovation 102 7 (12) 97

Building and machinery under construction 13,161 84,460 - 97,621

Total 36,397 86,605 (2,509) 120,493

(a) The carrying amount of a motor vehicle held under hire purchase arrangement in prior year was RM311,000.

(b) The Group’s property, plant and equipment include borrowing costs arising from bank loans borrowed specifically for the purpose of the construction of the building and machinery. During the financial year, the borrowing costs capitalised as property, plant and equipment amounted to RM4,274,000 (2009: RM1,050,000).

(c) The carrying amount of property, plant and equipment pledged to secure borrowings as referred to in Note 29(i) are as follows:-

Group

2010 2009

rM’000 rM’000

Industrial buildings and installations 10,857 11,194

Building and machinery under construction 137,904 97,621

148,761 108,815


59


13. investMent ProPerties

Group

2010 2009

rM’000 rM’000

cost

At 1 July/30 June 2,105 2,105

accumulated depreciation

At 1 July 430 404

Depreciation charge for the year 26 26

At 30 June 456 430

net carrying amount 1,649 1,675 The investment properties comprise freehold land and buildings, which are charged as securities for borrowings granted to the Group as referred to in Note

29(i).

Fair value has been determined based on valuations at the balance sheet date. Valuations are performed by accredited independent valuers based on comparison method. The fair value of the investment properties as at balance sheet date was RM2,540,000 (2009: RM2,235,000).

14. PrePaiD lanD lease PayMents

Group

2010 2009

rM’000 rM’000

At 1 July 4,449 4,500

Amortisation for the year (52) (51)

At 30 June 4,397 4,449

Analysed as:

Long term leasehold land 4,397 4,449

Prepaid land lease payments are charged as securities for borrowings granted to the Group as referred to in Note 29(i).


60


15. DeveloPMent exPenDiture

Group

2010 2009

rM’000 rM’000

Cost 1,664 1,412

Accumulated amortisation (758) (741)

Net carrying amount 906 671

At 1 July 671 428

Additional development expenditure capitalised 252 258

Amortisation for the year (17) (15)

At 30 June 906 671

16. investMent in subsiDiaries

company

2010 2009

rM’000 rM’000

Unquoted shares, at valuation 90,443 78,482

subsidiaries

Details of the subsidiaries are as follows:

name of subsidiariescountry ofincorporation

effective equityinterest Principal activities

2010 2009

% %

Kotra Pharma (M) Sdn Bhd Malaysia 100 100 Development, manufacture and trading of pharmaceutical and healthcare products

Appeton Healthcare Sdn Bhd Malaysia 100 100 Dormant


61


17. DeferreD tax assets

Group

2010 2009

rM’000 rM’000

At 1 July 750 613

Recognised in the income statement (Note 10) (750) 137

At 30 June - 750

Presented after appropriate offsetting as follows:

Deferred tax liabilities (3,765) (2,811)

Deferred tax assets 3,765 3,561

- 750

The component and movement of deferred tax liabilities and assets during the financial year are as follows:

Deferred tax liabilities:-

Development accelerated

expenditure capital

capitalised allowance total

rM’000 rM’000 rM’000

At 1 July 2008 (72) (2,481) (2,553)

Recognised in the income statement (96) (162) (258)

At 30 June 2009 (168) (2,643) (2,811)

Recognised in the income statement (58) (896) (954)

At 30 June 2010 (226) (3,539) (3,765)


62


17. DeferreD tax assets (Cont’d)

Deferred tax assets:-

unabsorbedtax losses

unutilised capital and

industrial building

allowances Provision Payables others total

rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

At 1 July 2008 1,190 - 281 1,646 49 3,166

Recognised in the income statement - 231 - 164 - 395

At 30 June 2009 1,190 231 281 1,810 49 3,561

Recognised in the income statement 373 (231) - (729) 791 204

At 30 June 2010 1,563 - 281 1,081 840 3,765

At the balance sheet date, the Group has unutilised tax losses and other unused tax credits of approximately RM349,000 and RM3,194,000 respectively that are available for offset against future taxable profits of the Group, for which no deferred tax asset is recognised due to uncertainty of its recoverability in view of the expected availability of additional tax incentives.

18. inventories

Group

2010 2009

rM’000 rM’000

At cost:

Raw materials 11,627 7,592

Work-in-progress 98 55

Finished goods 15,381 13,464

27,106 21,111

At net realisable value:

Finished goods 1,121 -

28,227 21,111


63


19. traDe receivables

Group

2010 2009

rM’000 rM’000

Trade receivables 38,397 31,180

Less: Provision for doubtful debts (768) (716)

37,629 30,464

The Group’s normal trade credit terms range from 60 to 120 days. Other credit terms are assessed and approved on a case-by-case basis.

Included in trade receivables are amounts due from related parties as disclosed in Note 32(c) to the financial statements. The Group has no significant concentration of credit risk that may arise from exposure to a single debtor or to groups of debtors.

The foreign currency exposure profile of trade receivables at the balance sheet date are as follows:-

Group

2010 2009

rM’000 rM’000

United States Dollar 20,851 11,332

Singapore Dollar 263 302

21,114 11,634

20. otHer receivables

Group company

2010 2009 2010 2009

rM’000 rM’000 rM’000 rM’000

Deposits 140 184 1 1

Other receivables 936 1,311 - -

Advances to suppliers of property, plant and equipment 890 6,649 - -

Prepayments 87 122 - -

2,053 8,266 1 1


64


20. otHer receivables (Cont’d)

The foreign currency exposure profile of other receivables at the balance sheet date are as follows:-

Group

2010 2009

rM’000 rM’000

Euro 247 2,229

United States Dollar 628 1,047

Philippine Peso 28 492

903 3,768

21. aMounts Due froM subsiDiaries

The amounts due from subsidiaries are non-trade in nature, unsecured, interest-free and repayable on demand.

22. casH anD casH equivalents

Group company

2010 2009 2010 2009

rM’000 rM’000 rM’000 rM’000

Cash on hand and at banks 8,132 6,962 28 69

Deposits with a licensed bank - 1,600 - -

Cash and bank balances 8,132 8,562 28 69

Less: Bank overdrafts (Note 29) (8,418) (3,792) - -

Cash and cash equivalents (286) 4,770 28 69

The weighted average effective interest rate and the average maturity of deposits in prior year was 1.15% per annum and 1 day respectively.

The foreign currency exposure of cash and bank balances at the balance sheet date are as follows:-

Group

2010 2009

rM’000 rM’000

Euro 31 1

United States Dollar 2,715 3,666


2,872 3,965


65


23. sHare caPital

number of ordinary shares of rM0.50 each amount

2010 2009 2010 2009

‘000 ‘000 rM’000 rM’000

Authorised 200,000 200,000 100,000 100,000

Issued and fully paid 123,806 123,806 61,903 61,903

An Employees’ Share Option Scheme (ESOS) was approved by the Securities Commission on 22 April 2003 and the shareholders at an Extraordinary General Meeting held on 10 July 2003.

The principal features of the ESOS are as follows:-

(a) The maximum number of new ordinary shares of RM0.50 each to be offered shall not exceed 15% of the issued and paid-up share capital of the Company at any point of time during the existence of the ESOS.

(b) Eligible directors or employees of the Group are directors or employees of the Group who have been confirmed in the service of the Group prior to the offer or, if the employee is employed under contract basis, the contract should be for a duration of at least one (1) year.

(c) The option price may be subjected to a discount of not more than 10% of the average of the market quotation of the shares as shown in the daily official list issued by Bursa Malaysia Securities Berhad for the five trading days immediately preceding the offer date, or at par value of the shares of the Company, whichever is higher.

(d) An Option is personal to the grantee. Save and except as provided in Clause 20.1 of the Bye-Laws, an Option shall be non-assignable and non-transferable.

(e) The ESOS is in force for a period of 10 years from 24 July 2003 and expires on 23 July 2013.


66

23. sHare caPital (Cont’d)

The movements in the share options during the financial year were as follows:

Date of offerexerciseperiod

exercise price per ordinary share

balance at1.7.2009

During the year balance at 30.6.2010 Granted lapsed

rM

24.7.2003 24.7.2004 0.58 1,909,920 - (376,280) 1,533,640

24.7.2003 24.7.2006 0.58 3,820,280 - (752,560) 3,067,720

24.7.2003 24.7.2009 0.58 3,833,920 - (752,560) 3,081,360

15.6.2004 15.6.2005 0.51 220,000 - (1,320) 218,680

15.6.2004 15.6.2007 0.51 440,000 - (2,640) 437,360

15.6.2004 15.6.2010 0.51 440,000 - (2,640) 437,360

12.7.2005 12.7.2006 0.53 188,200 - (21,200) 167,000

12.7.2005 12.7.2008 0.53 462,000 - (42,400) 419,600

12.7.2005 12.7.2011 0.53 462,000 - (42,400) 419,600

21.7.2006 21.7.2007 0.53 214,400 - (35,200) 179,200

21.7.2006 21.7.2009 0.53 448,800 - (70,400) 378,400

21.7.2006 21.7.2012 0.53 448,800 - (70,400) 378,400

2.7.2007 2.7.2008 0.78 143,000 - (30,800) 112,200

2.7.2007 2.7.2010 0.78 286,000 - (61,600) 224,400

2.7.2007 2.7.2012 0.78 286,000 - (61,600) 224,400

13,603,320 - (2,324,000) 11,279,320

Options exercisable in a particular year but not exercised can be carried forward to the subsequent years provided they are exercised prior to the expiry date of the ESOS on 23 July 2013.

24. sHare PreMiuM reserve

The share premium reserve arose from the issue of shares by way of private placement and public offer less amounts incurred for listing expenses and utilised for bonus share issue.



67


25. sHare oPtions reserve

Group and company

2010 2009

rM’000 rM’000

Share options granted under ESOS:

At 1 July 314 241

Addition during the year (Note 7) - 73

Share options lapsed (3) -

At 30 June 311 314 The share option reserve represents the equity-settled share options granted to employees. This reserve is made up of the cumulative value of services received

from employees recorded on grant of share options.

26. otHer reserve

Other reserve of the Company represents the changes in the fair value of the investment in subsidiary less amount utilised for bonus share issue.

27. retaineD earninGs

Subject to the agreement of the tax authorities, at the balance sheet date, the Company has:-

(a) tax-exempt income of approximately RM5,296,000 (2009: RM5,296,000) available for the purpose of paying tax-exempt dividends; and

(b) tax credits under Section 108 of the Income Tax Act, 1967 to frank the payment of dividends of approximately RM942,000 (2009: RM942,000) out of its retained earnings.

The balance of the retained earnings, if distributed as dividends, will be taxed at the statutory tax rate.

At the balance sheet date, the Company has not elected for the single tier tax system. When the tax credit balance is fully utilised, or by 31 December 2013 at the latest, the Company will automatically move to the single tier tax system. Under the single tier tax system, tax on the Company’s profit is a final tax, and dividends distributed to the shareholders will be exempted from tax.


68


28. DeferreD incoMe

Group

2010 2009

rM’000 rM’000

Cost 261 261

Less: Deferred income recognised to date (241) (215)

20 46

At 1 July 46 72

Recognised as income during the financial year (26) (26)

At 30 June 20 46

Deferred income relates to government grant received by the Group in respect of purchase of plant and equipment.

29. borrowinGs

Group

2010 2009

rM’000 rM’000

short-term borrowings

Unsecured:

Bank overdraft 8,418 3,792

Bankers’ acceptances 8,286 1,895

16,704 5,687

Secured:


Finance lease payables - 15

Term loans 4,556 317

29,561 13,289


69


29. borrowinGs (Cont’d)

Group

2010 2009

rM’000 rM’000

long-term borrowings

Secured:

Term loans 85,194 63,045

total borrowings

Bank overdraft (Note 22) 8,418 3,792


Finance lease payables - 15

Term loans 89,750 63,362

114,755 76,334

Maturity of borrowings (excluding finance lease payables)

Within one year 29,561 13,274

More than 1 year and less than 2 years 8,442 7,000

More than 2 years and less than 5 years 16,955 21,000

Five years or more 59,797 35,045

114,755 76,319 The finance lease payables in prior year bear interest rate of 2.74% per annum.

The weighted average effective interest rates per annum at the balance sheet date of borrowings, excluding finance lease payables, were as follows:

Group

2010 2009

% %

Bank overdrafts 6.24 5.55

Bankers’ acceptances 2.89 3.77

Term loans 5.59 4.83

The unsecured short term borrowings of the Group are guaranteed by the Company.


70


29. borrowinGs (Cont’d)

The secured short-term borrowings and term loans are secured by:

(i) fixed charges over certain assets of the Group as disclosed in Note 12, Note 13 and Note 14 to the financial statements;

(ii) specific debenture for RM25,000,000 over a subsidiary’s machinery under construction;

(iii) debentures over a subsidiary’s all fixed and floating assets both present and future; and

(iv) corporate guarantee from the Company.

The foreign currency exposure of borrowings at the balance sheet date are as follows:-

Group

2010 2009

rM’000 rM’000

United States Dollar 5,314 -

Euro 1,347 2,796

6,661 2,796

30. traDe Payables

The normal trade credit terms granted to the Group range from 60 to 90 days. Included in trade payables is an amount due to a related party as disclosed in Note 32(c) to the financial statements.

The foreign currency exposure profile of trade payables at the balance sheet date are as follows:-

Group

2010 2009

rM’000 rM’000

Australian Dollar - 559

Euro 1,525 5,743

United States Dollar 1,029 460

Philippine Peso 110 -


2,670 6,774


71


31. otHer Payables

Group company

2010 2009 2010 2009

rM’000 rM’000 rM’000 rM’000

Accruals 2,334 2,120 102 33

Payroll liabilities 3,427 3,260 - -

Due to suppliers of property, plant and equipment 2,139 3,762 - -

Other payables 1,243 1,064 - -

9,143 10,206 102 33

32. relateD Party Disclosures

(a) For the purpose of the financial statements, the Group and the Company have related party relationships with:-

(i) its subsidiaries and directors;

(ii) the directors who are key management personnel;

(iii) companies in which key management personnel have significant financial interests; and

(iv) a company in which a close member of the family of certain key management personnel has significant financial interests.

(b) In addition to the information disclosed elsewhere in the financial statements, the Group and the Company carried out the following transactions with its related parties during the financial year:-

2010 2009

rM’000 rM’000

Group

Companies in which key management personnel have significant financial interests:

- contract manufacturing cost paid/payable - 64

- rental of premises paid/payable 95 92

- royalty paid/payable 32 38

A company in which a close member of the family of certain key management personnel has significant financial interests:

- sale of goods 590 305

company

A subsidiary

- management fee received/receivable 300 300


72


32. relateD Party Disclosures (Cont’d)

(c) The outstanding balances at the balance sheet date are as follows:

Group

2010 2009

rM’000 rM’000

Companies in which key management personnel have significant financial interests:

- trade receivables 16 67

- trade payables 100 163

A company in which close members of the family of certain key management personnel have significant financial interests:

- trade receivables 188 148

- trade payables 32 17

(d) Compensation of key management personnel

Group company

2010 2009 2010 2009

rM’000 rM’000 rM’000 rM’000

Directors’ remuneration

- fees 182 173 182 173

- emoluments 1,408 1,582 - -

- other short-term employee benefits (including estimated monetary value of benefits-in-kind) 167 154 4 4

1,757 1,909 186 177

Executive directors of the Group and Company have been granted the following number of options under the ESOS:

Group and company

2010 2009

‘000 ‘000

At 1 July 7,200 8,800

Rescindment - (1,600)

Lapsed (1,800) -

At 30 June 5,400 7,200

The share options were granted on the same terms and conditions as those offered to other employees of the Group. In prior year, certain key management personnel voluntarily accepted a rescindment of 1,600,000 of the above ESOS granted to them pursuant to an amendment of the Company’s ESOS Bye-Laws to ensure compliance with the Listing Requirements of Bursa Malaysia Securities Berhad for Main Market.


73

33. caPital coMMitMents

Group

2010 2009

rM’000 rM’000

For property, plant and equipment:

- approved and contracted for 18,710 37,915

- approved but not contracted for 11,272 13,964

29,982 51,879

34. seGMental rePortinG

The segment information in respect of the Group’s operating segments for the year ended 30 June 2010 are as follows:-

local export total

2010 2009 2010 2009 2010 2009

rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

External revenue 62,539 58,856 39,818 31,138 102,357 89,994

Profit from operations 15,045 13,318 8,349 900 23,394 14,218

A reconciliation of total profit from operations to total consolidated profit before tax is provided as follows:-

total

2010 2009

rM’000 rM’000

Profit from operations for reportable segments 23,394 14,218

Expenses managed on a central basis (12,587) (8,180)

Other operating income 2,506 3,552

Consolidated profit from operations 13,313 9,590

Finance cost (847) (605)

Consolidated profit before tax 12,466 8,985



74


35. fair values of financial assets anD liabilities

The carrying amounts of term loans approximate fair values as the interest rates charged are close to market interest rates for loans of similar risk profile as at balance sheet date.

The carrying amounts of the other financial assets and financial liabilities approximate their fair values due to their relatively short maturity periods.

The nominal amount and net fair value of financial instruments not recognised in the balance sheets of the Company are as follows:

2010 2009

nominalamount

net fairvalue

nominalamount

net fair value

rM’000 rM’000 rM’000 rM’000

Corporate guarantees 114,755 * 76,334 *

* The fair value of contingent liabilities is expected to be minimal as the subsidiary is expected to be able to repay the banking facilities.


75

List of Properties

title / Location Description & usage Land area / existing use

tenure built-up area(sq. m.)

approximate age of

building

net book valueas at

30 Jun 2010rM

H.S.(D) 35311 & H.S. (D) 35312. Lot Nos. PT4239 & PT4240, Mukim of Cheng, District of Melaka Tengah, Malacca

Two joined plots of land with a single storey factory and two storey office block

Warehouse and production area

17,611 sq.m./ pharmaceutical manufacturing plant

Warehouse and production area

Leasehold expiring on 14.8.2096

5,120.04

6,613.00

13 years

10 years

12,564,420

GPP 7972 & GPP 5156, Lot Nos. 43 & 45, Town Area III (3), District of Melaka Tengah, Malacca

Two plots of land with a 2 ½ storey office building, a store and a warehouse

2,252.10 sq.m./office, store & warehouse

Freehold 1,539.31 Office & Store- 18 years

Warehouse-14 years

1,308,002

Geran 4612, Lot No. 42, Town Area III (3), District of Melaka Tengah, Malacca

Commercial site erected with a double storey shophouse cum storehouse

636.2 sq.m./ Double storey shophouse

Freehold 488.9 35 to 39 years 341,000

Lot 9262Mukim of Cheng, District of Melaka Tengah, Malacca

One plot of land with a factory under construction

23,614 sq.m. Leasehold expiring on 15.8.2096

22,808 - 82,238,965

96,452,387


76

eDividend29 November 2010

Dear Shareholder,

iMPleMentation of electronic DiviDenD PayMent (“eDiviDenD”)

what is eDividend?Electronic Dividend Payment or eDividend refers to the payment of cash dividends by a listed issuer to its shareholders by directly crediting the shareholders’ cash dividend entitlements into their respective bank accounts. All listed companies are required to pay dividends to shareholders (who have provided their bank account information) via eDividend for dividends entitlements on or after 1 September 2010.

edividend benefits

➢ No More Delays From 3-14 days via cheques to 0/1 day via eDividend to receive dividend payment.

➢ Assurance of Certainty Dividends credited into bank accounts on a timely basis whether Kuala Lumpur or outstation. No more missing cheques/expired cheques. No unclaimed moneys.

➢ Convenience and Simplicity No more visits to banks to deposit cheques. Can opt for one (1) bank account for all CDS accounts. Same bank account applies for future new CDS accounts.

➢ eNotification upon Payment For shareholders who provide email and mobile details.

➢ No Cost to Shareholders No bank charges on dividend amount.

No depository administration fee for registration within grace period.

registration of eDividendShareholders are given a one-year grace period from 19 april 2010 until 18 april 2011 to provide their bank account information to Bursa Malaysia Depository Sdn Bhd.

How do i provide my bank account information for eDividend?You must complete the relevant prescribed form and submit it together with the required supporting documents to your stock broker’s office where your CDS account is maintained.

what supporting documents are required?

Individual CDS Depositor • NRIC or Passport or Authority Card or other acceptable identification documents.• Bank Statement or Bank Saving Book or details of your bank account obtained from your bank’s website that has been certified by

your bank or copy of the letter from your bank confirming your bank account details. Corporate CDS Depositor • Certified true copy of Certificate of Incorporation/Certificate of Registration.

• Certified true copy of Bank Statement or Bank Saving Book or details of your bank account obtained from your bank’s website that has been certified by your bank or copy of the letter from your bank confirming your bank account details.

You are encouraged to update your bank account information through your stock broker firm soonest. There will be a fee charged after the grace period.

contact Details For more information, kindly refer to the eDividend page at www.bursamalaysia.com

For queries, please contact Bursa Malaysia Customer Care Centre or our Share Registrar, Mega Corporate Services Sdn Bhd as follows:

Bursa Malaysia Customer Care Centre Mega Corporate Services Sdn BhdTel: (603) 27320067 Tel: 03-26924271Email: [email protected] Fax : 03-27325388

Thank you.

Yours faithfullyOw Pee Juan (MAICSA 7013304)Secretary


77

Notice of Annual General Meeting

notice is Hereby Given that the Eleventh Annual General Meeting of the Company will be held at Bunga Melati Room, Level 7, Renaissance Hotel Melaka, Jalan Bendahara, 75100 Melaka on Wednesday, 22 December 2010 at 10.00 a.m. to transact the following business: -

aGenDa

orDinary business

1) To receive and adopt the Audited Financial Statements for the financial year ended 30 June 2010 together with the reports of the Directors and Auditors thereon.

resolution 1

2) To approve the payment of Directors’ fees amounting to RM182,000 for the year ended 30 June 2010. resolution 2

3) To re-elect the following Directors who retire by rotation in accordance with Article 97 of the Company’s Articles of Association and being eligible offer themselves for re-election:-

i) Piong Teck Onn resolution 3ii) P’ng Beng Hoe resolution 4iii) Azhar bin Hussain resolution 5

4) To consider and, if thought fit, to pass the following Resolutions pursuant to Section 129 (6) of the Companies Act, 1965:-

i) “That Y. Bhg. Tan Sri Datuk Dr. Omar bin Abdul Rahman, a Director who retires in accordance with Section 129 (2) of the Companies Act, 1965, be and is hereby re-appointed as a Director of the Company to hold office until the conclusion of the next Annual General Meeting.”

resolution 6

ii) “That Omar bin Md. Khir, a Director who retires in accordance with Section 129 (2) of the Companies Act, 1965, be and is hereby re-appointed as a Director of the Company to hold office until the conclusion of the next Annual General Meeting.”

resolution 7

5) To re-appoint Messrs Crowe Horwath as auditors of the Company and to authorise the Directors to fix their remuneration. resolution 8

sPecial business

6) To consider and if thought fit, to pass the following Resolutions with or without modifications: -

a. ordinary resolution – authority pursuant to section 132D of the companies act, 1965 for the Directors to issue shares

“That pursuant to Section 132D of the Companies Act, 1965, the Directors be and are hereby authorised to issue new shares in the Company at any time until the conclusion of the next Annual General Meeting upon such terms and conditions, for such purposes and to such person or persons whomsoever as the Directors may, in their absolute discretion, deem fit provided that the aggregate number of shares to be issued does not exceed 10% of the issued share capital of the Company for the time being, subject always to the approval of all the relevant authorities being obtained for such allotment and issue.”

resolution 9


78

b. ordinary resolutions – Proposed renewal of the existing shareholders’ mandate for recurrent related party transactions of a revenue or trading nature and proposed new shareholders’ mandate for new recurrent related party transactions of a revenue or trading nature

That approval be and is hereby given for the Company and/or its subsidiaries to enter into the categories of recurrent related party transactions of a revenue or trading nature with the following related parties as specified in Section 2.3.2 (a) of the Circular to Shareholders dated 29 November 2010 (“the Circular”):-

• Kwong Onn Tong Sdn. Bhd.• Lonnix (M) Sdn. Bhd.• Appeton Laboratory Sdn. Bhd.• Estate of Piong Nam Kim @ Piong Pak Kim• Thames Bioscience (M) Sdn. Bhd.• Piong Teck Onn• Y. Bhg. Datuk Piong Teck Yen

resolution 10

That a mandate is hereby given to the Company and/or its subsidiaries to enter into a new category of recurrent related party transactions of a revenue or trading nature with the following related party as specified in Section 2.3.2 (b) of the Circular:-

• N’Care International Sdn. Bhd.resolution 11

Provided always that:-

i) the recurrent related party transactions are carried out in the ordinary course of business and on terms not more favourable to the related parties than those generally available to the public and not detrimental to the minority shareholders of the Company; and

ii) disclosure is made in the annual report of the aggregate value of all the recurrent related party transactions conducted pursuant to the shareholders’ mandate during the financial year in the manner required under the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”);

That the Shareholders’ Mandate shall continue to be in force until:

a) the conclusion of the next Annual General Meeting of the Company following this Annual General Meeting at which the ordinary resolution for the shareholders’ mandate is passed, at which time it will lapse, unless a resolution passed at the next Annual General Meeting, whereby the authority is renewed;

b) the expiration of the period within which the next Annual General Meeting after the date it is required to be held pursuant to Section 143 (1) of the Companies Act, 1965 (but shall not extend to such extensions as may be allowed pursuant to Section 143 (2) of the Companies Act, 1965); or

c) revoked or varied by resolutions passed by the shareholders in a general meeting;

whichever is earliest;

And that the Directors be and are hereby authorised to complete and do all such acts and things (including executing such documents as may be required) to give effect to the transactions contemplated and/or authorised by the Shareholders’ Mandate.



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c. special resolution – proposed amendment to the articles of association

“That the existing Article 153 of the Company’s Articles of Association be deleted in its entirety and be substituted thereof with the following new Article 153:

Any dividend, interest or other money payable in cash in respect of shares may be paid by cheque or warrant and sent through the post directed to the address of the holder or paid via electronic transfer of remittance to the account provided by the holder or to such person and to such address as the holder may in writing direct or, if several persons are entitled thereto in consequence of the death or bankruptcy of the holder, to any one of such persons or to such person and to such address as such persons may by writing direct. Every such cheque or warrant or electronic transfer of remittance shall be made payable to the holder of the person to whom it is sent or to such person as the holder or person or persons entitled to the share in consequence of the death or bankruptcy of the holder may direct and the payment of any such cheque or warrant or electronic transfer of remittance shall operate as a good discharge to the Company in respect of the dividend represented thereby. Every such cheque or warrant or electronic transfer of remittance shall be sent at the risk of the person entitled to the money thereby represented.”

resolution 12

By order of the Board

ow Pee Juan MaH li cHen(MAICSA 7013304) (MAICSA 7022751)Company Secretary Company Secretary

MELAKA29 November 2010

notes:-

1. A member entitled to attend and vote at the general meeting is entitled to appoint a proxy/proxies who may but need not be a member of the Company to vote in his/her stead. If the proxy is not a member, he need not be an advocate, an approved company auditor or a person approved by the Registrar of Companies.

2. Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he/she specifies the proportion of his/her holdings to be represented by each proxy.

3. The instrument appointing a proxy shall be in writing under the hand of the appointer or his/her attorney duly authorised in writing or, if the appointer is a corporation, either under its common seal or under the hand of an officer or attorney duly authorised.

4. The instrument appointing a proxy must be deposited at the registered office of the Company at 48 Jalan Kota Laksamana 2/15, Taman Kota Laksamana, Seksyen 2, 75200 Melaka, not less than forty-eight (48) hours before the time for holding the meeting or any adjournment thereof.

exPlanation notes

resolution 9

The proposed Ordinary Resolution No. 9 under Special Business, if passed, will give the Directors of the Company authority to issue shares of the Company up to an amount not exceeding in total 10% of the issued share capital of the Company for such purposes as the Directors consider would be in the interest of the Company. This would avoid any delay and cost involved in convening a general meeting to specifically approve such an issue of shares. This authority, unless revoked or varied at a general meeting, will expire at the next Annual General Meeting of the Company.

The general mandate sought to grant authority to Directors to allot and issue new shares is a renewal of the mandate that was approved by the shareholders at the Tenth Annual General Meeting held on 25 November 2009. The renewal of the general mandate is to provide flexibility to the Company to issue new shares without the need to convene a separate general meeting to obtain shareholders’ approval so as to avoid incurring additional cost and time. The purpose of this general mandate is for possible fund raising exercises including but not limited to further placement of shares for purpose of funding current and/or future investment projects, working capital and/or acquisitions.

Up to the date of this Notice, the Company has not issued any new shares pursuant to the mandate granted to the Directors at the Tenth Annual General Meeting because there was no need for any fund raising activity for the purpose of investment, acquisition or working capital.

resolutions 10 & 11

Please refer to the Circular to the shareholders of the Company dated 29 November 2010 which is despatched together with the Annual Report.

resolution 12

The proposed Special Resolution for the amendment to Article 153 of the Company’s Articles of Association is to allow the Company to pay cash dividend electronically by crediting the dividend into each shareholders’ bank account in line with the eDividend implemented by Bursa Securities. Please refer to the attached letter to shareholders dated 29 November 2010 on page 76 of this Annual Report in respect of eDividend for further information.


80

Statement AccompanyingNotice of Annual General Meeting Pursuant to Rule 8.27(2) of The Main Market Listing Requirements of Bursa Malaysia Securities Berhad

The Director who is standing for re-election at the Eleventh Annual General Meeting is as follows:

1. Piong Teck Onn2. P’ng Beng Hoe3. Azhar bin Hussain4. Y. Bhg. Tan Sri Datuk Dr. Omar bin Abdul Rahman5. Omar bin Md. Khir

The details of the above Directors are set out in the Profile of Directors on pages 2 to 5 of this Annual Report. Their securities holdings in the Company is set out on page 81 of this Annual Report.


81

Authorised Share Capital : RM100,000,000.00Issued and Fully Paid-up Share Capital : RM61,902,781.50Class of Shares : Ordinary shares of RM0.50 eachVoting Rights : 1 vote per ordinary share

analysis of sHareHolDinGs

size of shareholdings no. of shareholders % of shareholders no. of shares held % of shares heldLess than 100 shares 37 3.0655 1,194 0.0010100 to 1,000 shares 130 10.7705 57,652 0.04661,001 to 10,000 shares 702 58.1607 3,098,650 2.502810,001 to 100,000 shares 274 22.7009 6,995,781 5.6506100,001 to less than 5% of issued shares 63 5.2196 49,027,924 39.60075% and above of issued shares 1 0.0829 64,624,362 52.1983Total 1,207 100.0000 123,805,563 100.0000

substantial sHareHolDers

no. shareholderno. of shares Held

Direct % Indirect %1. Piong Nam Kim Holdings Sdn. Bhd. 64,624,362 52.20 - 0.002. Piong Nam Kim @ Piong Pak Kim* - 0.00 64,624,362 52.203. Piong Teck Onn* - 0.00 64,624,362 52.204. Piong Teck Min* 1,276,220 1.03 64,624,362 52.205. Piong Teck They* 1,113,186 0.90 64,624,362 52.206. Y. Bhg. Datuk Piong Teck Yen* 2,200 + 64,624,362 52.207. Yong Soon Moi* 4,514,364 3.65 64,624,362 52.208. Chin Swee Chang** - 0.00 64,624,362 52.20

notes:

+ Less than 0.01%

* Deemed interested by virtue of his/her interests in Piong Nam Kim Holdings Sdn. Bhd. pursuant to Section 6A (4) of the Companies Act, 1965.

** Deemed interested by virtue of her husband’s (Piong Teck Onn) interests in Piong Nam Kim Holdings Sdn. Bhd.

Directors’ sHareHolDinGs(as per the register of directors’ shareholdings)

no. Directorsno. of shares Held

Direct % Indirect %1. Y. Bhg. Tan Sri Datuk Dr. Omar bin Abdul Rahman 4,840 + - 0.002. Piong Teck Onn* - 0.00 64,624,362 52.203. Piong Teck Min* 1,276,220 1.03 64,624,362 52.204. Y. Bhg. Datuk Piong Teck Yen* 2,200 + 64,624,362 52.205. Chin Swee Chang** - 0.00 64,624,362 52.206. Omar bin Md. Khir 868,060 0.70 - 0.007. P’ng Beng Hoe - 0.00 - 0.008. Azhar bin Hussain - 0.00 - 0.00

notes:

+ Less than 0.01%

* Deemed interested by virtue of his/her interests in Piong Nam Kim Holdings Sdn. Bhd. pursuant to Section 6A (4) of the Companies Act, 1965.

** Deemed interested by virtue of her husband’s (Piong Teck Onn) interests in Piong Nam Kim Holdings Sdn. Bhd.

Shareholding StatisticsAs 10 November 2010


82

Shareholding Statistics

30 larGest sHareHolDers(As per the Register of members)

no. shareholder no. of shares %

1. Piong Nam Kim Holdings Sdn. Bhd. 64,624,362 52.1983

2. Amsec Nominees (Asing) Sdn. Bhd.Amtrustee Berhad For Galleon Asset Limited (CS-GALLEON)

6,125,402 4.9476

3. Yong Soon Moi 4,514,364 3.6463

4. Malaysian Technology Development Corporation Sdn. Bhd. 3,631,423 2.9332

5. Chin Ai Mei 2,819,801 2.2776

6. JF Apex Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account For Teo Kwee Hock (MARGIN)

2,757,500 2.2273

7. Malaysia Nominees (Tempatan) Sendirian BerhadGreat Eastern Life Assurance (Malaysia) Berhad (LGF)

2,694,120 2.1761

8. Platinum Essence Sdn. Bhd. 1,870,940 1.5112

9. Lin Ah Lan 1,825,360 1.4744

10. Seah Tin Kim 1,675,320 1.3532

11. Cresdel Holdings Sdn. Bhd. 1,529,160 1.2351

12. Lok Suet Leng 1,456,000 1.1760

13. Piong Teck Min 1,276,220 1.0308

14. Ho Jonathan Lep Kee 1,210,000 0.9773

15 Vijay Kanchan 1,029,300 0.8314

16. Omar Bin Md. Khir 868,060 0.7011

17. Piong Teck They 808,280 0.6529

18. JF Apex Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account For Teo Siew Lai (MARGIN)

661,300 0.5341

19. Piong Teck Wah 627,220 0.5066

20. TA Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account For Vanitha A/P Kaneson

562,560 0.4544

21. Yew Lai Mae 540,000 0.4362

22. Chin Kee Kwong 514,800 0.4158

23. Chin Chee Keong 512,600 0.4140

24. Chin Chee Min 512,600 0.4140

25. TA Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account For Ting Leong Hua

503,900 0.4070

26. Kok Hon Seng 487,560 0.3938

27. Piong Teck Fong 461,560 0.3728

28. Lembaga Tabung Amanah Warisan Negeri Terengganu 460,164 0.3717

29. Koay Hooi Lian 458,260 0.3701

30. TA Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account For Sellammah A/P Palani Samy

439,000 0.3546

Form Of Proxy(Before completing this form, please refer to the notes below)

no. of ordinary shares held

I/We NRIC/Company no. (FULL NAME IN BLOCK CAPITAL)

of (FULL ADDRESS)

being a member(s) of KOTRA INDUSTRIES BERHAD hereby appoint the following person(s):-

no. name of proxy, nric no., & address no. of ordinary shares represented by proxy

1.

2.

or failing whom, the Chairman of the meeting as my/our proxy/proxies to vote for me/us on my/our behalf at the Eleventh Annual General Meeting of the Company which will be held at Bunga Melati Room, Level 7, Renaissance Hotel Melaka, Jalan Bendahara, 75100 Melaka, on Wednesday, 22 December 2010 at 10.00 a.m. for the following purposes:-

no. resolution for against

orDinary business

1. To receive and adopt the Audited Financial Statements for the financial year ended 30 June 2010 together with the reports of the Directors and Auditors thereon.

2. To approve the payment of Directors’ fees amounting to RM182,000 for the year ended 30 June 2010.

3. To re-elect Piong Teck Onn as Director.

4. To re-elect P’ng Beng Hoe as Director.

5. To re-elect Azhar bin Hussain as Director.

6. To re-appoint Y. Bhg. Tan Sri Datuk Dr. Omar Bin Abdul Rahman.

7. To re-appoint Omar Bin Md. Khir.

8. To re-appoint Messrs Crowe Horwath as auditors of the Company and to authorise the Directors to fix their re-muneration.

sPecial business

9. Authority pursuant to Section 132D of the Companies Act, 1965 for the Directors to issue shares.

10. Proposed renewal of the existing shareholders’ mandate for recurrent related party transactions of a revenue or trading nature.

11. Proposed new shareholders’ mandate for new recurrent related party transactions of a revenue or trading na-ture.

12. Proposed Amendment to the Articles of Association

(Please indicate with an “X” in the appropriate spaces provided above how you wish your votes to be cast on the resolutions specified in the Notice of Eleventh Annual General Meeting. If no specific direction as to voting is given, the proxy/proxies will vote or abstain from voting at his/her/their discretion.)

Signed this day of Signature(s) / Common Seal of Shareholder(s)

Notes:-A member entitled to attend and vote at the general meeting is entitled to appoint a proxy/proxies who may but need not be a member of the Company to vote in his/her stead. If the proxy is not a member, he need not be an advocate, an approved company auditor or a person approved by the Registrar of Companies.

Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he/she specifies the proportion of his/her holdings to be represented by each proxy.

The instrument appointing a proxy shall be in writing under the hand of the appointer or his/her attorney duly authorised in writing or, if the appointer is a corporation, either under its common seal or under the hand of an officer or attorney duly authorised.

The instrument appointing a proxy must be deposited at the registered office of the Company at 48 Jalan Kota Laksamana 2/15, Taman Kota Laksamana, Seksyen 2, 75200 Melaka, not less than forty-eight (48) hours before the time for holding the meeting or any adjournment thereof.

Kotra inDustries berHaD(497632-P)

48 Jalan Kota Laksamana 2/15Taman Kota Laksamana

Seksyen 275200 Melaka

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